GENEVA, Switzerland, September 28, 2021 – Corporations’ focus on improving cost-efficiency and productivity has enabled them to achieve higher margins over the last decade, but it also left companies significantly exposed to various operational shocks resulting from the COVID-19 pandemic, according to DuPont Sustainable Solutions’ (DSS) 2021 Global Operations Risk Management Survey of company executives. This priority on lean management principles, coupled with insufficient anticipation of business threats and lack of recovery planning, has left many companies struggling to recover from the pandemic and puts others at higher operational risk during the next crisis.
"While placing a premium on achieving cost efficiencies by minimizing inventories, streamlining supply chains, sourcing from low-cost labor markets, and implementing just-in-time manufacturing looked great on many corporate ledgers, it left companies with little flexibility to absorb the supply, sourcing, operating, and commercial shocks caused by the pandemic,” said Davide Vassallo, Chief Executive Officer of DuPont Sustainable Solutions. “There are many benefits to pursuing lean management strategies, but it is clear that the much-publicized agility they offer organizations starts to falter if companies lack a balanced, holistic strategy for managing people, operational excellence, ESG (environment, social, governance) and operational risks."
DSS' 2021 Global Operations Risk Management Survey of executives revealed two important findings:
1) A short-term approach to operational risk management is one of the greatest threats to organizations.
- Significantly fewer executives feel prepared today to successfully manage a significant business disruption than before the pandemic. In DSS’ 2019 Operational Risk Management survey, 81 percent of executives said that they had a plan capable of addressing an unexpected business disruption, but today only 43 percent claim to have a capable plan. A comprehensive awareness of all probable risks is critical.
- Three out of every four executives surveyed (77 percent) say their company’s risk profile has either increased or significantly increased during the pandemic. These executives ranked productivity as the dominant topic in the board room. Of the surveyed executives who said health and safety ranked lowest on their boardroom agenda, 58 percent noticed an increase in their risk profile.
2) Placing a priority on cost reduction left organizations exposed to unforeseen risks.
- The majority of executives surveyed (81 percent) were preoccupied with achieving cost-efficiency and higher productivity to the extent that they left little to no ability in the organization to pivot quickly in times of emergency.
- As a result, more than half the executives surveyed (54 percent) reported having to shut down operations during the pandemic.
- The leading challenges faced by executives during the pandemic were related to ineffective operational risk management. Sixty-four percent of executives reported the pandemic negatively affected their organization’s supply chain, 61 percent said it negatively impacted health and safety, 36 percent said it negatively impacted operations and 31 percent said it negatively impacted business/operations planning.
“Many companies have fallen into a siloed approach to addressing workplace risk, ESG and operational excellence without realizing it. Through better integration of risk reduction and optimization, and by making them an ongoing, long-term priority throughout the organization, companies will become more resilient and competitive,” said Vassallo.
To learn how companies can emerge from the pandemic stronger and be better prepared to manage future risks, and to read DSS’ survey findings in more detail, view the white paper about the survey here:
Access the Report
DSS’ annual global risk management survey of executives benchmarks and measures the maturity of operational risk management programs in companies across numerous industries and examines the challenges they face in effectively managing risk to improve business performance. Executives from more than 203 companies participated in this latest survey, which was conducted between February and April 2021. Nearly half of survey participants (49 percent) were senior executives (CEO, CFO, etc.), 15 percent were at the vice president level and 36 percent were among the director level. Roughly one-third (36 percent) of participating companies are in the manufacturing sector, 21 percent are in food and beverage and 16 percent in oil and gas.
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About DuPont Sustainable Solutions
DuPont Sustainable Solutions (DSS) is a leading provider of operations management consulting services that enable organizations to protect their employees and assets, realize operational efficiencies, innovate more rapidly and build workforce capability. By leveraging its DuPont heritage, deep industry and business process expertise, and diverse team of expert consultants, DSS helps clients turn operations management into a competitive advantage. Additional information is available at www.consultdss.com.
DuPont is owned by affiliates of DuPont de Nemours, Inc. and licensed to DSS for a limited period of time.
Contact: Kelly Carson