Survey finds oil and gas firms need to be protected from financial risks within supply chain

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16th July 2015 15:53 - Oil and Gas

A recent, global survey – carried out by Achilles - has discovered that many large oil and gas firms are not putting measures in place to Survey finds oil and gas firms need to be protected from financial risks within supply chainprotect themselves, if their suppliers ever go through financial difficulty.

Of the oil and gas companies in the survey, approximately 25 per cent claimed to have experienced disruption within their supply chain in the last year, due to a supplier’s financial problems.

The survey found that a further 25 per cent of large oil and gas companies do not check potential new suppliers’ financial history, before issuing a tender or contract. As well as this, 41 per cent said that they do not gather financial reports for suppliers lower down the supply chain, before appointing them as a supplier.

30 per cent of the companies questioned said that they do not currently have anti-bribery and corruption policies in place for their main suppliers, and one fifth said that they do not have health and safety policies for suppliers lower down the chain than the first tier.

The researchers also discovered that 19 per cent of oil and gas companies were not certain whether they have sufficiently managed financial risks, which could arise from working with their suppliers.

The survey discovered that more than 20,000 suppliers have entered their information into an online profile of their business critical information, which then has potential to be seen by more than 300 oil and gas purchasing organisations.

The Global Director of oil and gas at Achilles, Mike Viator, said of the findings:

“Across the globe, oil and gas companies are under pressure to prioritise cutting costs, rather than risks, associated with their suppliers.

“This is a false economy and a short-termist view because, as recent headlines have shown, the cost of doing business with a risky supplier can be astronomical.

“Increasingly, businesses are expected to reveal potential risks in their supply chain out of a duty to consumers and shareholders – such as the Sarbanes-Oxley legislation for public companies in the US.

“This survey suggests that many oil and gas companies are experiencing the financial failure of a supplier, yet not putting in place proper safeguards in terms of due diligence to prevent it from happening again.

“In our experience, oil and gas firms can most effectively tackle risks associated with suppliers when they work collaboratively to apply common standards required of all contractors.

“In a network, businesses can share the administrative burden of collecting, managing and updating business critical information about suppliers.

“With accurate data, buying organisations can proactively manage and mitigate risk.”

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