The necessity of integrating your Risk, Supplier, and BCM functions
With CPS 230, integrating Risk, Supplier Management, and Business Continuity Management is no longer optional. This blog post looks at the components of this integration and explores why integration is so important.
With the requirements for the upcoming APRA Prudential Standard CPS 230 financial regulation, integrating risk, supplier management, and business continuity management is no longer optional in the Australian financial industry.
This blog post is the first in a series designed to help address the requirements of CPS 230.
Today, we’ll start with a look at the components of this integration (Risk, Business Continuity Management, and Supplier Management) and why integration is so important in today’s business environment.
A holistic approach to risk, supplier, and business continuity management is crucial for the viability and competitiveness of contemporary organisations. While disparate departments or teams have traditionally handled these functions, there is growing recognition of the benefits of integrating these elements into a cohesive, cross-functional strategy.
Key components of integration
Understanding the critical components of integration and how they interact is fundamental to creating a holistic approach to managing risk, supplier relationships, and business continuity. Let’s take a look at each component’s unique role and the potential synergies between them:
Risk Management: Risk management encompasses processes for identifying, assessing, and controlling threats to an organisation’s capital and earnings. It’s a strategic function that helps the organisation avoid or mitigate risks. A well-developed risk management strategy focuses on financial and operational risks and considers strategic, reputational, and environmental risks. When integrated with supplier and business continuity management, risk management can improve the robustness of the supply chain and the effectiveness of business continuity strategies.
Supplier Management: Supplier management focuses on managing relationships with suppliers to ensure a reliable supply of goods and services. It involves sourcing and procurement, supplier evaluation, and performance monitoring. Supplier risk is crucial, including supplier failure, supply disruption, or pricing instability. By integrating supplier management with risk and business continuity management, organisations can better anticipate, respond to, and mitigate supplier-related risks.
Business Continuity Planning: Business continuity planning ensures that essential business operations can continue during and after a significant disruption. This includes planning for various possible disruptive events, from natural disasters to cyberattacks or supplier failures. By integrating business continuity planning with risk and supplier management, organisations can ensure their plans are robust, comprehensive, and capable of addressing a wide range of potential disruptions.
The intersection of these components creates a proactive and resilient management strategy that anticipates potential risks, effectively manages supplier relationships, and ensures the continuity of critical business functions. The success of this integration hinges on developing a collaborative organisational culture, adopting suitable technologies, and committing to ongoing communication and coordination across all areas of the organisation.
Why integration is important
Integrating these three functions can provide several key benefits.
First, this approach promotes a consistent understanding and response to risks across the organisation, mitigating the chance of conflicting or disjointed risk management strategies. Furthermore, an integrated approach enhances team communication and collaboration, allowing for more timely and informed decision-making.
Effective supplier management is also enhanced through integration with risk and business continuity planning. By aligning these functions, organisations can work more effectively with suppliers to identify and mitigate potential risks, ensuring the continuity of critical supply chains. Moreover, this alignment can improve supplier relationships and performance, contributing to overall business success.
Business continuity planning benefits from this integration as it ensures plans are grounded in a comprehensive understanding of organisational risks and supplier dependencies. By incorporating risk and supplier management insights into continuity plans, organisations are better equipped to ensure their critical operations can be maintained during unexpected disruptions.
Nevertheless, organisations that do not effectively integrate these functions face significant challenges. A lack of integration can result in siloed decision-making, suboptimal resource allocation, and an inability to respond effectively to and recover from disruptive events.
Overall, integrating risk, supplier, and business continuity management is paramount for contemporary organisations.
In upcoming blog posts, we’ll investigate the strategies and best practices for achieving this integration, as well as some of the challenges involved and how to overcome them. Stay tuned!
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