Many organizations in Dubai and UAE are vulnerable to supply chain disruptions. Supply chain issues, including production delays, inventory shortages, or delayed delivery, can have a significant impact on both businesses and consumers. In this article, we are going to identify the supply chain among the top 10 risks that Internal Audit Service UAE experts should be aware of. We know you will need to conduct this audit very soon so we created this article to help you get started.
Five Supply Chain Risks Audit in UAE
An audit of a supply chain examines all activities and processes an organization uses to deliver its products or services to customers. These are all possible disruptions that could prevent goods or materials from reaching you or your customers.
However, these risks are too many to examine. Technically, there are two primary drivers of increased supply chain risk:
- Key goods materials shortages
- Logistics and shipping challenges
These are both factors that contribute to higher prices for goods and materials not only in the UAE but also in other parts of the world. Internal audit services in Dubai can now consider the impact of these drivers on the key risks as we finish the risk assessment.
The internal audit function partnering with internal teams that have an understanding of the supply chain will give any Dubai entity a better insight. These teams can include legal operations for contracts, vendor risks management, procurement teams, and distribution centers. This will allow internal audit services Dubai teams to leverage valuable information. You should speak with the distribution center team if your organization is a supplier. This will allow you to verify that they are meeting SLAs as well as to confirm they meet shipping requirements.
Reputational risk
Your reputation could be damaged if your suppliers experience shortages or logistical delays. Customers will not be aware of supply chain disruptions or that you aren’t meeting their needs. Some loyal customers might sympathize with you, but others will be more open to new business opportunities.
The actions of the suppliers can also affect the reputation of a UAE company.
If a company in Dubai, UAE has business relationships with suppliers that have negative public perceptions, the public will judge the entity harshly.
Cybersecurity Risk
In addition, cybersecurity incidents can lead to delays and shortages. Cybersecurity breaches in a factory, distribution center, trucking company, or factory can reduce your ability to fulfill your customer’s needs. For example, Ransomware hackers in the United States took over the Colonial Pipeline and it had a ripple effect on many supply chains. The panic buying by the public led to logistic companies having difficulty finding fuel for their trucks, which caused delays in shipping. Let us assume that the merchandise took longer to reach the customer. They might then blame the company they bought the item from, even though the delay occurred further up the chain, which could have an impact on the shipping company.
Geopolitical Risk
Supply chain bottlenecks are being created by trade wars, border tension, and government instability. There are some goods and merchandise that can only be obtained from a limited number of sources. This makes it difficult to find backup suppliers, which could lead to shortages. Companies in Dubai and UAE that conduct their business globally need to understand where their products and materials come from and how they get there.
Contract Compliance Risk
Auditing your supply chain requires the use of contracts. Contracts generally define the level of interaction that you can have with vendors and their performance metrics. It is important to make sure that the contract owner and enforcer of the commitments are done first. Auditors will need to ensure that the contracts have a right-to-audit clause and service level agreements or rather SLAs before they can start an audit. In addition, make sure to check the contract for language that protects your company against any illegal actions by the supplier.
Quality Risk
Suppliers will substitute lesser products when there is a shortage. This can be done to lower the cost or to replace the product that is no longer available. This was evident during the pandemic when hospitals received lower-quality gloves from suppliers. Instead of using nitrile, suppliers were sending gloves made out of latex. Suppliers’ actions can have a significant impact on your ability and safety, as well as the safety of your customers and employees.
Choose Top Internal Audit Companies In UAE
Reputable Audit Firms in Dubai provide world-class accounting and auditing services to customers in Dubai and the UAE. If you need to outsource your internal audit function, please get in touch.
Read More: Finding the Best Internal Audit Firms in Dubai and UAE
