Risk management is C-suite's duty

In the midst of the COVID-19 pandemic, many automotive manufacturers and suppliers are scrambling to develop risk management policies and procedures. While there are many critical unknowns, and circumstances change by the hour, it's becoming increasingly clear that risk management isn't just tied to business productivity or ticking regulatory boxes anymore. As we've learned, it is now a cornerstone of social responsibility. Businesses must now look at risk management through the lens of this pandemic and beyond their core stakeholders to understand how their actions — or inactions — impact the welfare of society.

As we work to emerge from this global crisis, we are undeniably operating in a "new normal." If they have not already done so, it will be imperative for auto manufacturers and suppliers to assess their risk management structure and plans from the ground up.

With technology, changing regulations, evolving customer preferences and now even a global pandemic disrupting industries worldwide, having a risk management plan is no longer just an option — it is a must.

Unfortunately, for many auto manufacturers and suppliers, risk management and assessment lives in a silo. It's often not deeply rooted in a company's — and arguably, the industry's — culture. The current crisis proves this culture has to change.

Making risk management a top priority must come from the C-suite. It can no longer be delegated to midlevel quality and supply chain managers at a plant. Far too often, there is a clear and present gap between the C-suite's interpretation of risk management and how the business actually addresses it.

What's even more imperative now is that Tier 1s require Tier 2s to do the same with Tier 3s and so on down the supply chain. If the industry does not prioritize risk assessment and contingency planning, it will take longer for companies to recover in a crisis such as the current pandemic.

Executives across the business need to take a new look at risk as a matter of social responsibility. As we are learning today, lives and livelihoods are at stake due to the fallout from the economic and health crisis. Brand reputations can be damaged.

As we plan how best to do business, here are three key ideas that can help you make risk management an important part of your operations.

Unfortunately, outdated technologies can be found throughout the automotive supply chain. As part of a comprehensive risk management plan, updating technologies and systems to enable employees to work remotely via the cloud is essential. In addition to providing basic platform functions, such as data entry and reporting, adaptive cloud-based systems can help companies respond quickly to disruptions and give executives real-time visibility to data before they determine how to move forward during crisis scenarios.

Tier 1 level contingency plans are often too high-level — and often reside in someone's head. In addition, things like information technology systems, natural disasters, skills gaps and subsupplier risk are missing. If the C-suite conducted spot-checks of contingency plans, they would be amazed at the lack of clarity, planning and detail.

You should, at a minimum, ensure your contingency plans include key internal and external contacts; containment; recovery steps to normal operations; key personnel responsible for action; training; testing; validating; reviewing; lessons learned; and corrective actions.

Top management can feel more assured if their manufacturing sites employ a quality management system, or QMS, to address risk and contingency planning. As we've learned with the pandemic, companies should conduct contingency planning for labor shortages, IT skills for bandwidth and employee safety. A QMS solution can provide a wide range of benefits:

• Contingency plans that are stored and automatically alert the organization to review, test and validate.
• Visibility of issues across the enterprise, with all customers and suppliers allowing you to see performance and risk.
• A matrix that reflects employee training.
• The ability to track lessons learned after a disruption.