Recognize, React and Remedy Supply Chain Risks

Seven Red Flags You Can’t Ignore

Supply chain incidents and disruptions can occur at any moment and create challenges for businesses of all kinds—telecom, broadband and ICT providers are not exempt from these challenges. Between semiconductor and equipment shortages, shifts in demand and a lack of qualified labor, the telecom industry faces its share of supply chain opposition and risks.

Recognizing those risks isn't always easy, and then there's the question of what to do next. What risks can be mitigated or managed? When do you disqualify a high-risk supplier or contractor?

Here are seven supply chain red flags in the telecom industry to watch out for along with ways to recognize and react appropriately:

Red flag #1: Suppliers and Contractors Cutting Safety Corners

One concern in today's economic climate is that contractors and suppliers may cut safety corners to save money. In recessionary times, most companies are deciding where to cut costs, and health and safety compliance are often looked at as cost centers. Reducing or eliminating these measures could open you up to more cost and more risk down the road—50% more injuries occur with undertrained workers. If you cut a corner, you create two new ones.

Recognize: Screen for company-level compliance by using consistent compliance screening processes, ensuring proper insurance coverage, and benchmarking total recordable incident rates (TRIR) and other safety metrics against industry averages.

Tip: Don’t forget to monitor smaller spend suppliers. Thousands of injuries and fatalities are caused by suppliers that are not as proactively managed as top-spend suppliers. 

React: Collaborate with, educate, and provide resources for your suppliers like templates, policies, continuity plans and specific criteria they need to get compliant. When compliance is not met, or there is a safety incident, respond with assistance as opposed to enforcement. Coach suppliers through corrective actions with specific and actionable timelines.

Use exceptions to safety compliance sparingly and with care. If you set precedence on one exception, you might open the door for others. Stay consistent across the board because suppliers talk. If you provide an exception for an organization (even if it is earned), other organizations will expect the same treatment. 

"Recent research by the National Safety Council (NSC) says supply chain risks can be costly at $47,000 per accident, $1 million per day/environmental violation and $4.2 million per cyber incident.”

Red flag #2: Lack of Safety Controls at Worker and Job Site Level

Many companies fail to establish supplier continuity regarding safety controls. Top-performing safety companies set stringent controls around managing variances.

Recognize: Screen for worker- and job site-level compliance by ensuring proper safety assessments and controls are in place, consistently monitoring and checking for worker-level qualifications and training and only allowing approved workers on your job site.

React: Support suppliers with corrective action by developing long-term relationships for sustainable risk management, making it easy for workers to get compliant quickly, deploying safety assessment processes at the job site level and instituting worker training programs.

Red flag #3: Emissions Regulations

Greenhouse gas and carbon emissions regulations are coming, and telecom companies must be prepared. The Securities and Exchange Commission (SEC) has proposed its plan¹ to standardize climate-related disclosures by having companies report their third-party-verified emissions starting in 2024.

Recognize: Because emissions regulations are moving from suggestive to mandatory, start small by creating a supply chain sustainability strategy now. Environmental, social, and corporate governance (ESG) initiatives must be driven top-down. A company’s board of directors or top leadership must drive the culture shift and support the difficult but right choices when they are put into action.

React: Getting started with ESG can be daunting, so start small. First, gather data from employees and suppliers by sending engagement surveys to gauge understanding and buy-in. Work up to measuring and monitoring your organization’s supply chain emissions.

To start, establish a committee (or several as ESG crosses many areas) to help create a comprehensive strategy. Once it is in place, provide necessary information, tools, and training to educate all on the company’s strategy and expectations annually.

Start now to properly prep employees and suppliers and maintain relationships and continuity. This guide² is an excellent resource to get started or advance in ESG maturity.

Red flag #4: Lack of Diversity

Many companies have new social policies to reflect the communities they serve by hiring and sourcing diverse employees and suppliers. This can include but isn’t limited to working with minority and woman-owned businesses or with a local small business versus an international one.

Recognize: Create a baseline for supply chain diversity by verifying, validating, and setting targets for supplier diversity status, usage, and spending. Benchmark your efforts by meeting a certain diversity percentage in your employees and suppliers. 

Internal stakeholders making buying decisions are accountable for ensuring the company supports a diverse base. 

React: Expand supplier sourcing by extending opportunities to diverse suppliers in bid events. Consider incentive-based measures to ensure stakeholders are leveraging various suppliers.

Encourage diverse sourcing success through mentorship like internal coaching and connecting less experienced suppliers with ones well-versed in diverse sourcing. Sharing best practices and tools will help your organization and theirs.

Tip: Diverse sourcing isn’t the only social issue to consider. Remember to assess your suppliers’ diversity policies and monitor human rights, modern slavery, and child labor indicators.

Red flag #5: Supplier Financial Issues

Dell’Oro recently shared their updated CapEx spend forecast for telecom providers saying, “Global telecom CapEx is projected to decline at a 2% to 3% CAGR over the next three years, as positive growth in India will not be enough to offset sharp CapEx cuts in North America.” That means you and your vendors will be tightening your financial belts.

Unfortunately, unexpected liabilities can occur when working with financially unstable companies. According to the Hartford Reports³, 5-15% more injuries occur in financially unstable companies. The challenge is having visibility into the financial health of suppliers throughout your supply chain. Credit checks simply are not going to cut it.

Recognize: The best way to uncover financial issues is to use continuous, real-time monitoring for financial health, liens, credit, and litigation. Many companies still use paper and spreadsheets dispersed to different departments and silos to track financials, which is likely insufficient in a DOJ investigation. A digital and verifiable audit trial containing historical financial data is the best method.

React: Consider diversifying suppliers and vendors to limit exposure. To ensure your own company’s financial health, confirm that all departments collaborate to get a complete financial picture. 

Red flag #6: Bad Actors

The supply chain has many bad actors—organizations not following best practices and, worse, engaging in criminal behavior, sanctions violations, and cybercrime. Repercussions for affiliating with bad actors can be costly and damage a company’s reputation.

Recognize: Continuously monitoring for legal issues is the best way to not be surprised by bad actors. Do your homework like consulting with the Office of Foreign Assets Control (OFAC) about sanctions and criminal activity. Do online research by looking for potential negative press on your suppliers. Educate your suppliers and vendors about phishing and cyber risks.

Red flag #7: Lack of Contractor Understanding or Engagement

Perhaps the most significant red flag is a lack of contractor understanding and engagement. Strong contractor relationships do not come by threatening compliance but by explaining to them why it's essential (holding their hand through the process).

Recognize: Build stronger contractor relationships by establishing consistent communication campaigns, educating on the benefits of compliance for them, and making it as simple as possible for your contractors and vendors to reach compliance.

React: Encourage feedback from suppliers via surveys and introduce incentives for well-performing vendors.

It’s time to consider reevaluating a working relationship if the following transpires:

• Supplier is unwilling to take corrective action
• Action plan timelines are missed
• TRIR or other incident data is trending up
• Workers aren’t qualified to do high-risk/hazardous job
• Contractors haven’t completed an approved safety assessment
• Workers don’t have necessary permits to complete the work
• Record bankruptcy fillings
• Documented history of financial struggles
• Leading indicators that suggest a near-term bankruptcy
• OFAC, global sanctions lists or PEP concerns
• Damaging litigation or other ongoing reputational issues

Many of these supply chain red flags can be avoided by working with a technology partner that can manage operational, reputational and regulatory compliance risks to reduce safety, liability, sustainability, workforce, cybersecurity and financial risks. Investing in a platform like this can seem lofty when trying to cut costs but consider the alternative. According to data from the National Safety Council (NSC), supply chain risks can be costly at $47,000 per accident, $1 million per day/environmental violation and $4.2 million per cyber incident.

Finding the right partner can help telecom companies establish a safe, sustainable and secure supply chain.

REFERENCES AND NOTES
1. SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors: https://www.sec.gov/news/press-release/2022-46
2. Supply Chain ESG Strategy: How to Get Started or Advance in Maturity: https://www.avetta.com/supply-chain-esg-strategy-how-get-started-or-advance-maturity
3. The Hartford Reports: More Than 40 Percent Of Small Businesses Will Experience A Claim In The Next 10 Years: https://newsroom.thehartford.com/newsroom-home/news-releases/news-releases-details/2015/The-Hartford-Reports-More-Than-40-Percent-Of-Small-Businesses-Will-Experience-A-Claim-In-The-Next-10-Years/default.aspx

SOURCES

• www.dellorogroup.com

• Data from The National Safety Council (NSC) Slips/Trips/Falls calculations, Resource Management Associates research, and Supplier support, document collection & verification, compliance assessments & corrective actions costs.