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Managing Your Supply Chain: Turning “Do No Harm” Into “Doing Good”

I am definitely an optimist.  Frankly, there is no alternative.  Pessimists, by definition, ensure that the result they fear will occur.  Another way of saying the same thing – karma is destiny.

Chief compliance officers see the world in terms of risks – they share a worldview with lawyers who are always asked to examine the worst case scenario.  For some reason, worst case scenarios make my skin crawl – they are very unlikely to occur, but if they do, they result in serious consequences.

When I look at a company’s operations, I see legal and reputational risks.  Of course, there is some overlap here – a legal risk can cause reputational harms.  I understand that phenomena.

To illustrate my pointy, let’s focus on supply chain management.  I like to divide the risks here into three categories – operational, legal and reputational risks.  A company’s vendors and suppliers create a large body of risks.

From an operational standpoint, we have a number of basic risks.  A critical supplier who is unable to supply us with critical goods or services can result in serious harm to a company’s operations.  As a result, companies have to develop contingency plans and build a supply chain that can withstand such disruptions.

On the legal front, vendors and suppliers create potential risks from anti-bribery, sanctions, AML and other legal risks.

Remember that vendors and suppliers only create FCPA risks when they act “on behalf of” or in a representational role.  Most vendors and suppliers, therefore, do not create legal risks.  However, every vendor and supplier creates reputational risks.

What do I mean?  A company does not want to learn that a vendor or supplier engages in human trafficking or relies on child labor to produce materials purchased to manufacture goods.  This is fairly obvious and companies have to understand their supply chains to avoid reputational harm.

The last thing a company wants to deal with is a vendor which suffers a horrific event or is identified for improper labor practices or similar types of misconduct.  These tragedies can quickly become a public relations nightmare with serious potential harm to a company’s reputational integrity.

In the face of this set of risks, I want to take a moment to advocate for something a little more positive.  What if a company can transform its supply chain from a set of risks and worst case scenarios, to a positive asset that reinforces a message of ethics and compliance?  In other words, I am suggesting that a company dedicate time and resources to converting its supply chain into a positive example of its commitment to ethics and integrity.

In this way, a company can tout its supply chain with a message of “doing good,” instead of a message of “do no harm.”  Maybe this is a little too subtle but consider the benefits of such a strategy.   A commitment to a positive supply chain will have a positive impact on a company’s workforce and ensure that its vendors meet exacting standards for ethical conduct and operations.

A company has to consider the need to establish its role in the corporate community and a positive force for responsibility.  A supply chain management initiative is an effective way to gain positive benefits and promote a company’s image as a responsible corporate citizen.

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1 Response

  1. October 26, 2018

    […] Do you have Chinese companies in your supply chain? You’d better wake up to the risk. Jaclyn Jaeger reports in Compliance Week. (sub req’d) Speaking of supply chains, Mike Volkov says they can do good, in the Corruption, Crime and Compliance […]