UAE businesses struggling to protect value chains
Oracle survey: 74% of UAE companies saw value chain disruption in past year
A research study commissioned by Oracle Corp has revealed that the majority of businesses in Europe, Middle East and Africa (EMEA) have been unable to protect their value chains against unforeseen events.
The report, “Managing the Value Chain in Turbulent Times”, is based on research concluded in March 2013, carried out Dynamic Markets on behalf of Oracle. The survey involved 677 senior decision makers in large organisations (more than 250 employees) across nine EMEA countries (UK, France, Germany, Russia, the Nordics, the Netherlands, Poland, Turkey and the UAE). The aim of the study was to assess how businesses are currently managing their value chains. It examined major aspects of value chain management, including risk, managing information, innovation and sustainability.
The survey found that over the past 12 months, 63% of businesses across EMEA have reported that they have seen disruption to their value chain due to unpredictable events beyond their control, such as economic disruption (24%), adverse weather (19%) and bankruptcy of suppliers (16%). In the UAE, this figure was higher than the EMEA average, at (74%).
Among those businesses that have experienced disruption in the past 12 months, it has taken 63 days on average to get back to normal operations following an incident. The cost to organisations has amounted to an average of approximately AED2.5m per incident and includes costs associated with lost sales, lost customers, product recall and the work involved in having to rebuild the value chain. In the UAE, the cost was higher than the regional average at around AED12.4m per incident. Compared with the UK, Russia, France, Germany and Turkey, the UAE had incurred the most significant cost per incident among all countries surveyed.
Despite the disruption being caused to the value chain, 75% of organisations admitted that they have not performed a risk assessment on all elements of the chain, leaving them exposed to financial loss. In fact, the study found that 58% of businesses which have not performed a comprehensive risk assessment have been affected by disruption, highlighting the impact this lack of preparation is having.
Compliance is also of great importance to large businesses in EMEA, with 79% having to comply with at least one type of legislation and trade regulation that affects their value chain. The research shows however, that a significant proportion of companies are struggling to comply with these regulations, with 30% having failed to comply with at least one that they are compelled to adhere to during the past 12 months. Failure to comply with legislation can lead to financial penalties or, in extreme cases, punitive legal measures.