2022 Wrapped: How data gave us insights into supply chain risk
In 2022 we assessed close to $9 billion of procurement spend from Australian (or Australian-based) companies against modern slavery risk indicators (including geography, commodity, industry sector and workforce profile). Pouring over this amount of data and working closely with procurement teams provided some useful insights into trends and issues to consider when assessing and addressing supply chain risk.
Our key takeaways:
Levels of modern slavery risk decreased by up to 60% in Tier 1 for some of our clients following additional due diligence and implementation of supplier corrective action plans. Undertaking due diligence and effectively engaging high-risk suppliers increases understanding of supply chain risk profiles and enables prioritisation of resources to manage risk.
We have consistently found 40 to 60% of procurement spend to be potentially high risk for modern slavery. While some companies have lower levels of risk (around 20% of total spend), potential high risk suppliers can comprise up to 80% of spend for some companies (particularly those undertaking major construction projects) .
Approximately 90% of suppliers analysed have no data collection systems, and therefore are unable to assess potential supply chain risk. Establishing internal systems and processes to collect spend category data is a valuable investment. As Modern Slavery Statements must be prepared annually, struggling to pull together data each reporting period is both frustrating and avoidable.
Actively engaging high risk Tier 1 suppliers will help identify and assess risk across the extended supply chain. Levels of potential modern slavery risk associated with Tier 2 suppliers can be significant with up to 80% of our clients' Tier 2 suppliers classified as high risk (for manufacturing and resources sector clients). With our support, many of our clients have started engaging, educating and assessing their Tier 2 suppliers.
Segmenting procurement spend based on country of location (or ‘spend regions’) as part of the assessment process provides valuable insights on risk associated with in-country spend and associated suppliers. Our country risk matrix, which is based on 13 global indices provides a more accurate assessment of risk than basing this assessment on the Global Slavery Index alone.
Focusing on risk associated with year-on-year suppliers rather than large ‘one off’ purchases will help to reduce modern slavery risk over time. Focusing resources on engaging and educating suppliers and undertaking additional due diligence and corrective action planning with highest risk suppliers ensures a targeted risk management approach.
Levels of potential modern slavery risk by spend within most of our clients’ Tier 1 suppliers varied by only five percent between reporting years. This is a surprising result considering several of our clients acquired new businesses during 2021 or had significantly higher levels of procurement due to Covid driven purchasing (particularly in the manufacturing sector).
