If Covid-19, the Ever Given and recent US droughts were acts of God, it’s tempting to put OPEC’s decision to limit oil production into the same category. Mere mortals they might be, but the cartel is almost God-like in its omnipotence. OPEC is unaccountable and unpredictable; it can cause an earthquake in the global price of oil simply by issuing a press release. So when the organisation announced a reduction in output this October, many businesses will have despaired at this latest cruel blow from on high.

That’s an understandable reaction, but it’s the wrong one. The price of petroleum and the knock-on, across-the-board inflation is indeed beyond businesses’ control. Yet no enterprise is impotent in the face of acts of God…or even acts of OPEC. If businesses want to regain control over their destiny – and win that all-important competitive advantage over their rivals – they need to understand the complex interaction of ever-changing risks, their effect on every department and, of course, their entire supply chain.

Beyond the bottom line

It’s easy to say that businesses should improve the way they quantify, analyse, and respond to evolving risks, but where do they start? And how, amid the monsoon drumbeat of data, can they identify the global, regional, and local developments that will have the biggest impact on their operations?

First, let’s focus on where many businesses go wrong. In the face of a fresh crisis the most common mistake is to laser-in on the bottom line to the exclusion of all other considerations such as the impact on individual departments and the ramifications for resilience, operations and, ultimately, the business’ hard-won reputation.

In today’s hyper-connected world, with just-in-time supply chains stretched to breaking point, a downpour in Delhi can affect factory output in Ohio. Risk is not one-dimensional: every event causes shockwaves that ripple throughout the organisation and its supply chain. To update the old nursery rhyme: “For want of a chip, the car was lost; for want of a car, the customer was lost; for want of a customer, the dealership died – and all for the loss of a microchip.”

Every department from finance to the factory floor needs real-time data on the latest risks and how they impact operations. Without this information, business leaders are taking strategic decisions blind. But worse than this blindness is the false hope offered by most modern “supply chain analytics” solutions. These technologies make many promises, but in reality, they’re one-dimensional, focusing on individual factors rather than the full range of risks affecting your businesses’ worldwide operations and partnerships.

Risk reimagined

Imagine a world where your organisation has insight into all the major risks you face; constantly updated, with data from a variety of trusted sources and, most crucially of all, detailing how all these risks interact and affect each area of your operations. How would multi-dimensional risk analysis enable you to transform your organisational response to disaster or disruption from supine to proactive? How could this knowledge translate into greater resilience, new opportunities, enhanced reputation – and strategic decisions taken on the best available data?

Let’s take a look at a couple of real-world examples. The first involves one of the world’s biggest airlines operating the largest fleet of A380s. During the pandemic, the airline anticipated challenges with deliveries of vital components for its A380 fleet (which, it should be noted, is now out of production by Airbus). The airline assumed that delays would be due to a simple matter of shortages – after all, almost every industry at the time was crippled by supply chain disruption. When we analysed the data, however, we found that access to materials wasn’t the only issue: it was also the fact that several tier-two suppliers weren’t financially stable, and this could adversely impact the performance and shipment of goods.

Not only does this information help enterprises identify single points of failure in their procurement chain; when they understand the root of the problem, they can explore ways to solve the problem, such as offering suppliers more flexible payment terms.

Our second example involves a global e-retailer that was the subject of a New York Times story that revealed some of its inventory had been produced by slave labour. One of the most urgent questions for the retailer was why a newspaper could discover something so serious, and yet the company couldn’t.

Again, this comes back to the complexity of risk in modern global supply chains. Unlike newspaper reporters, businesses don’t usually get tip-offs about unethical business practices among their suppliers, or their suppliers’ suppliers. Instead, they must discover things that their Nth-tier suppliers actively want to hide.

Reducing risk increases prosperity

Spikes in the price of oil, modern slavery and the financial health of suppliers are just three examples of the dazzling array of risks that businesses face today. As we’ve shown, identifying even one of those risks used to be a tough challenge for any business. Understanding every risk from geopolitical developments to fraud and money laundering was impossible – and certainly not in time to make informed strategic decisions.

Organisations can never become omnipotent, completely immune to acts of God or of humans. Thanks to multi-dimensional risk analysis, however, they can realistically strive for omniscience. And knowledge, as we know, is power. With detailed, up-to-the-minute insight, enterprises can seize control over emerging situations to an extent that they could never previously have imagined.

The first businesses to harness this superpower will reap huge competitive advantage; when every enterprise can effectively analyse and respond to risk, the benefits are greater resilience, security, and prosperity for all the world.