When finally achieving the collection of risk data in the supply chain, the next challenge becomes immediately clear: how to evaluate and analyse the information to be able to derive a dedicated action plan from it? This is the field of risk analysis which is an integral part of a successful risk management approach for every organisation willing to take advantage of supply chain visibility. Furthermore, this is a key requirement for compliance with supply chain integrity legislation, such as the German Supply Chain Law.

Once the data have been collected as part of a risk management approach through supply chain management tools, data analysis must focus on specific areas of interest. As defined by legislation the main topics of concern for supply chain integrity and reporting are human rights and environmental risks. This analysis must be done based on a set of criteria that is defined by legislation. For the German Supply Chain Law these include:

1. An analysis that must be appropriate to the type and scope of business activities of the organisation performing the assessment.
2. The influence organisations have on the supplier that has misconduct in human rights and environmental risks or has neglected its obligation.
3. The typical severity expected of the misconduct and the reversibility of the misconduct including the likelihood of a violation of human rights and environmental obligations.
4. The contribution to the violation of human rights and environmental risks of the supplier under assessment.

No matter the outcome of the analysis the results must always be transparently communicated with management. This can be directly the board or the head of procurement and supply chain management, or sustainability.

Generally, risk analysis is not a one-off task. Organisation must perform risk analysis annually and additionally for new product releases, the start of new projects, or when entering a new business field.

With a detailed analysis of supply chain risks, organisations gain a valuable action plan to introduce mitigation actions. Most effectively these risk mitigation actions are created and implemented collaboratively with suppliers through an open and transparent communication channel.

Xylene’s award-winning supply chain transparency solution integrates risk analysis by combining direct and indirect risk assessment in the system. This supports organisations to effectively understand risks in their supply chain and act upon them. Xylene Mapping is a supply chain management software solution providing your organisation with visibility, compliance, and ESG (Environmental, Social, and Governance) scoring across your supplier network.

Get in touch to find out more about Xylene and how to build visibility and assess your supply chain risks effectively.