LETTER TO THE EDITOR: Ever Given offers yet more lessons in third party risk management

The grounding of the Netherlands-bound container ship Ever Given posed an historically significant disruption and raised important questions about how an event like this could have happened, its lasting impact, and how to plan for similar potential events.

The Suez Canal is the only alternative to sailing around Africa, a much longer and more arduous journey. The circuitous route adds more than 2,000 miles to the journey, raises fuel costs and shipping charges and exposes the crew and cargo to piracy dangers. Ever Given’s grounding caused a massive supply chain disruption, highlighting the impact of third-party risk management. Much like in the early stages of the pandemic, organisations and broader markets alike realised the fragility of the infrastructure on which we all rely. The effects of one supertanker charting off course exposed countless organisations’ overreliance on key facilities and usually dependable transport methods.

This event drove an important reflection for those within and outside of the third-party risk management and business resilience industries, asking: What planning have we done to prevent a similar unanticipated catastrophe? Do we have a single source of reliance on a particular product or service? Do we have exposure to singular points of failure?

The best way to solve a future situation is to learn lessons from an existing one and use shared learnings to prevent future recurrences. In this case, perhaps the disaster could not have been prevented, but it does surface the challenges of industry overreliance. Whether it is ensuring additional capacity or increasing stockpiles of certain material goods, the endpoint solution becomes clear. Having other contingency plans – additional ships, considering air flight or very costly ground transportation alternatives – also bear consideration. The key takeaway: always have alternative plans.

Certainly, organisations must consider alternate service providers or supply redundancies. But these are not without a price tag, including higher cost of goods, services, or superfluous stores of various goods. As additional costs factor heavily into budgetary decisions, a careful business impact evaluation becomes crucial to making the right decisions. Business impact analyses are not an esoteric exercise – as the pandemic and the Ever Given have shown, it’s the real-world catastrophes that require careful planning, even if they can’t be identified ahead of time.

Advanced planning, while it won’t immediately free a ship from the shoals, minimises the damage or delay to customers and businesses. The ability to make proactive decisions in real time not only enables business to identify alternative options, but also to establish maximum acceptable downtime or loss capacity. In many cases, organisations must also consider safety (whether employees or customers), ability to protect key assets such as customer data, and the need for full disclosure when a problem does occur.

We can expect the stranded ship and global delays will lead to investigations by regulatory bodies, and also make global markets uneasy, challenging their confidence in seemingly reliable and efficient systems. Every organisations’ senior management team must work closely to determine their business and sustainability risks. Their discussions must be captured and well documented, to provide an adequate recollection of key facts and decisions to inform future strategy.

The world will continue to endure and overcome disasters like the pandemic and incidents such as the grounding of Ever Given. The real opportunity lies in learning how to mitigate supply chain risks in the future, through appropriate planning and disposition of resources.

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