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Supply chain expertise is in short supply across organisations, according to new UK report

Supply Chain Risks

A new report from the Chartered Institute of Internal Auditors has revealed that supply chain expertise is in short supply across organisations, particularly within internal audit functions, while business leaders and boards are urged to take immediate and comprehensive action on climate change and other environmental, social and governance (ESG) supply chain risks.

The report, titled Supply Chain ESG Risks: Harnessing the Potential of Internal Audit, underlines the important role of internal audit when providing assurance and supporting due diligence activities.

It examines the critical need for organisations to align supply chain operations with their own social values and environmental targets as regulators, customers and investors become increasingly demanding when it comes to greater supply chain transparency and accountability.

Produced via a series of meetings, roundtables and one-to-one interviews with internal audit professionals, Chief Audit Executives (CAEs), audit committee chairs and professionals with a background in ESG risk and supply chain risk, the report’s key takeaways include:

Climate Change & Supply Chain: Boards and audit committees must actively work towards decarbonising their supply chains to achieve Net Zero goals. Internal audit should be used to scrutinise business continuity plans and assess resilience against climate-related disruptions.

Managing ESG Risks: Comprehensive due diligence is vital when selecting suppliers to address ESG risks. Boards, senior management and internal audit functions should collaborate to ensure effective due diligence processes across the supply chain.

Compliance & Technology: Boards and audit committees need to utilise their internal audit function for independent assessment of the organisation’s compliance with the increasing amount of environmental and social laws and regulations. Leveraging technologies like data analytics and AI can also significantly enhance the assessment of ESG risks within the supply chain.

Commenting on the report’s climate hazard findings, Anne Kiem OBE, Chief Executive of the Chartered Institute of Internal Auditors, said: “The climate crisis is already having a significant impact on supply chains, and boards need to ensure they have robust risk management and business resilience strategies in place to cope with this.”

She continued: “At the same time, businesses need to focus on ensuring supply chains are decarbonising and not sabotaging their transition to net zero. Internal audit has a key role to play by providing the board and senior management with independent assurance that climate hazards in the supply chain are being addressed effectively.”

Richard Chambers, Senior Internal Audit Adviser at AuditBoard, added: “Business leaders are also being called upon to ensure their supply chains are more environmentally and socially responsible. By harnessing the power of internal audit, organisations can enhance their ability to identify, mitigate and manage climate-related and other ESG supply chain risks effectively.”

To learn more, download the report here.

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