Predicting the unpredictable: 11 strategies to mitigate risk

Rob Turner, Director of Procurement & Supply Chain at Deliveroo, the online food delivery business, encourages procurement and supply professionals to stay attuned to changes in business and society. Right now, inflation and cost of living issues are top concerns for consumers and organisations; the conflicts in Ukraine and now the Middle East are adding yet further uncertainty.  

2. You can't beat risk, but you can spread it.

Divya Seethapathy, Director of Global Procurement Transformation Program at Schneider Electric, says that “there’s no way to beat the global risks facing business today, but we can be resilient.” To build this into operations, France-based Schneider Electric operates a “power of two” initiative. “We have identified critical categories, such as niche tech items, and we try to have at least two sources in two regions. Cost can be an issue, but it helps build resilience and mitigate risk, and long-term contracts can help.” 

3. When it comes to mitigating risk, prepare to be agile

The Covid-19 pandemic was a dramatic example of the shortcomings of risk mitigation. “The British government prepares for a range of contingencies. It had a detailed plan for a flu pandemic, but not a Covid pandemic. So they had to return to the drawing board and start again,” observes Ben Fricke from Whitbread. Companies do need to plan for a range of risks but must be practical and prioritise, he says. “Don’t waste time mitigating against things that won’t happen. Prepare to be agile, like an improv jazz musician.” 

4. Collaboration spreads responsibility – and cost

“Rather than firefighting, companies need to build resilience,” says GE Healthcare’s Ruji Akhtar Mahmud, Head of Procurement Strategy, Digital Transformation & Lean Operations at GE Healthcare . And that resilience needs to be “end-to-end. Transparency can help to identify threats and mitigations can be put in place. But collaborating with suppliers can help spread responsibility - and cost.” This process is not about forcing suppliers to simply fill in endless surveys, she says. “It’s about mindset and culture. It’s about getting the message across that unethical practices are simply not acceptable.” On the contrary, she says, the fact is ethical businesses thrive and are more profitable. 

5. Some things are predictable.

One of Premier Inn's biggest risks is eggs. “We sell a lot of eggs,” says Ben Fricke. The company calculates that each guest eats, on average, 2.6 eggs. “We can get away without yoghurt, but not eggs!” Since it is not unknown to face an egg shortage, Fricke has a four-point risk mitigation strategy. “Transparency and contact with the supply base is key. That way, we can spot things early. Second, it’s about leveraging relationships. We look after our suppliers and invest in our relationships. Third is looking at ways to reduce demand. That means avoiding wastage and speaking with our people on the ground to only prepare eggs to order. And finally, there’s partial substitution.” 

6. Teaching risk to the risk-takers.

A big issue for Deliveroo’s Rob Turner has been to educate an entrepreneurial, fast-growing and risk-taking business about the importance of identifying and mitigating future risks, especially since it became listed on the London Stock Exchange in 2021. “The company was started and built by risk-takers,” he says. Deliveroo is essentially a technology business, with risk exposure in areas such as data, processing, brand and its rider workforce. A key role for Turner involves mindset and educating people about their roles and responsibilities. "We need to help people through it, help them learn to identify risk.” 

7. Test your risk mitigation plan.

“Do some mock recalls, see if it works,” advises Whitbread’s Ben Fricke. “You may find it throws up some unexpected things.” He adds: “Risk audit meetings are always at 10am on a Tuesday because that’s convenient. But the problems tend to come on a Friday afternoon.” As such, he says, it pays to be prepared in old-fashioned ways. “Make sure you have your key data, information, contact details on, say, a piece of laminated paper, and see that all the key people have it.” 

8. Short-term costs can lead to long-term gains.

In a previous role, Ruji Akhtar Mahmoud became aware that a supplier was treating its people unethically. The company acted swiftly, but at some cost. Some stakeholders were unhappy, and the new supplier cost more. But once the company had explained the change to its customer and, from there, to consumers, both were pleased; the business became a preferred supplier, increased market share, recouped the cost and made a profit. She advocates a similar approach when taking climate-positive action. “Switching from traditional plastic packaging to reusable packaging may increase costs initially, but it can help a business grow market share. Customers will approve; business will grow as a result.”

9. Ideological partnership is key.

For Schneider Electric’s Divya Seethapathy, mitigating risk and increasing resilience is about developing an “ideological partnership” with suppliers. “It’s about going deeper into the supply chain,” she says. “We want to be carbon-neutral, so that means our supply chain must go on that journey, too. Not just the tier one suppliers, but tiers two, three and four.” This isn’t about issuing edicts, it’s about developing strong and deep relationships, and realising that risks can’t be handled alone. “It needs to go beyond merely a transactional relationship,” she says. “And must be based on trust.” 

10. Sustainability helps recruitment.

Research says that around 40% of people choose a job based on the company’s purpose and its sustainability agenda, says GE Healthcare’s Ruji Akhtar Mahmud. Since consumers are increasingly interested in transparency and sustainability, these really should be a core part of any business.  

11. Get out and about.

Whitbread’s Ben Fricke recalls becoming aware of one business risk when he was driving to see a supplier on an isolated farm. “There was only one road in and out. ‘What if this road floods?’ I thought.” It was the kind of insight he would only have known by getting out and seeing suppliers.