New research is warning that utilities companies worldwide, including in the UK, are experiencing problems caused by suppliers’ failures in health and safety and financials – yet they are still confident they are adequately managing supplier risk.

In a market survey, almost two-thirds (65%) of utilities companies worldwide said they were confident that the way their business manages its supply chain helps them successfully identify and manage potential risk.

However, more than a quarter (26%) of utilities companies had experienced problems caused by suppliers’ financial instability and more than one in five (22%) had experienced problems caused by suppliers’ poor health and safety practices.

In addition, 14% did not know how many of their suppliers would be described as high risk. High risk was defined in the survey as those suppliers whose failure could damage a firm’s financial or reputational standing or ability to operate normally.

The market survey was commissioned by global supplier information firm Achilles, which operates UVDB, the pre-qualification and verification scheme used by a majority of UK utilities firms. The survey was conducted by independent research company IFF, which interviewed procurement professionals from 65 large utilities companies in the UK, the USA, Spain, the Nordics and Brazil.

One UK utility company told the survey their company was left in the lurch when a supplier became insolvent.  The company said they had to find new suppliers which resulted in a financial cost to them and also affected their ability to operate normally as they were faced with delays and disruptions.

Tom Grand, UK & Ireland Regional Director at Achilles, said:

“Firms know the failure of a supplier can have potentially devastating effects on a business including extreme delays and significant financial cost. But this survey suggests some firms might be unable to predict where a disruption may occur because they do not know the risk profile of their suppliers."

“Prevention is vital when it comes to minimising any type of risk – including financial and health and safety issues.  We have found the best way to do so is by gathering comprehensive information on suppliers in business critical areas, assessing each supplier using a risk matrix and performing-wide ranging audits on those deemed to be medium and high risk."

“In our experience, utilities companies can most effectively tackle risks associated with suppliers when they work collaboratively to set common industry standards required of all contractors.  By working in a network, businesses can share the administrative burden of collecting, managing and updating business critical information about suppliers.

“Accurate and up-to-date information regarding suppliers is essential to allow utilities companies to make informed and clever decisions to proactively prevent risk.”