Australian business leaders downplay risks to supply chains

Businesses in Australia appear to be overconfident in their readiness to respond to operational, geopolitical, and cyber security risks in their supply chains, according to a survey from McGrathNicol and YouGov.

Asked for their views on future supply chain challenges, most Australian business leaders expressed optimism on their preparedness. In the survey of some 300 Aussie directors and C-Suite leaders, 75% said that their organisation has faced challenges in addressed supply chain risks due to lack of awareness, limited data, and apathy.

“Australia is completely dependent on local and international supply chains and digital networks. Australian businesses have their heads in the sand if they don’t think that conflicts, cyber attacks or trade disputes, whether locally or internationally, will affect them,” said Matt Fehon, partner at McGrathNicol.

“Geopolitical tensions or natural disasters are just as likely to shut down an essential offshore software development team or call centre as they are to disrupt physical supply chains like shipping lanes and ports. We believe the optimism noted data shows that business leaders have not grasped the impact that global events such as US and Taiwanese elections, the Hamas-Israel conflict and other regional disruptions, will have on their ability to do business,” Fehon added.

Though there is certainly plenty to worry about when it comes to supply chain disruptions, most Australian business leaders are not sweating it. According to the survey, 97% of business leaders expressed confidence in their organisation's ability to navigate risks affecting their supply chain.

Despite serious, on-going geopolitical uncertainty and a likelihood that things could get worse in the short term, only 16% of business leaders surveyed said that they believed geopolitical risk would increase in severity in terms of the impact on their organisation over the next 12 months.

As far as cyber security risks, a majority of Australian organisations are aware of the potential challenges they face, with 64% saying they see cyber security as the second greatest challenge they face. Despite that awareness of the risks, only 16% expected those risks would impact their organisation over the next year, and only 27% included cyber security within their supply chain management plans.

Supply chain issues that are currently affecting businesses around the world include materials shortages, increased logistic costs, environmental risks and natural disaster, and other factors like the war in Ukraine and Israel, among other persistent geopolitical risks.

“Supply chain risk management programs have failed to keep pace with the modern supply chain. While businesses fully understand financial risks, they need to better address the other operational risks that directly threaten and impact the company’s bottom line,” said Rhyan Stephens, partner at McGrathNicol.