Managing Manufacturing and Supply Chain Risks in Global Automotive Operations

Global automotive operations are among the most complex in modern industry, with extensive supply chains, lean manufacturing systems, and significant interdependencies. Debra Elkins’ presentation at the March 2025 NC State ERM Roundtable Summit outlined how General Motors (GM) approached the challenge of mitigating operational risks while maintaining efficiency and profitability. The insights provided are invaluable for any organization looking to improve risk management across manufacturing and supply chain processes.

Why CEOs and CFOs Should Care About Manufacturing and Supply Chain Risks

Supply chain disruptions have a significant financial impact on organizations, often comparable to traditional crises like fires or explosions. Research highlights the scale of these impacts:

• 10.28% drop in shareholder value: The average decrease in share price following a supply chain “glitch,” with a recovery time of approximately 60 trading days.
• 8% decrease from traditional crises: Events like fires or explosions lead to similarly sharp declines in share price, with recovery taking roughly 50 trading days.

Moreover, 69% of CFOs and risk managers at Global 1000 companies identify supply chain disruptions as one of the top threats to revenue sources. As the nature of supply chains evolves, CEOs and CFOs must prioritize risk management to safeguard their organizations against these disruptions.

Why Supply Chain Risks Are Increasing

The automotive industry is undergoing a paradigm shift in how supply chains operate. Key trends include:

• Lean/Just-In-Time Operations: Reduced inventory and capacity levels create efficiency but leave no room for error.
• Global Sourcing: Greater dependence on international suppliers introduces geopolitical, logistical, and environmental risks.
• Single Sourcing: Reliance on one supplier amplifies vulnerability to disruptions.
• Real-Time Responsiveness: Meeting customer demands quickly can strain operational flexibility.

While these strategies offer cost savings and production efficiencies, they also expose supply chains to heightened risks.

Steps to Identify and Assess Manufacturing & Supply Chain Risks

GM developed a structured, five-step approach to operational risk management.

Step 1: Form a Cross-Functional Team
A comprehensive risk management team involves multiple business units, such as:

• Facilities Management (asset maintenance, insurance)
• Supply Chain Operations (supplier and logistics risk)
• IT Systems (disaster recovery planning)
• Audit Teams (business continuity and crisis management)

Cross-functional collaboration ensures risks are addressed holistically, leveraging diverse expertise.

Step 2: Develop an Enterprise Portfolio of Risks
Categorizing risks into financial, strategic, hazard, and operational portfolios helps identify risk owners and assign accountability. This process also fosters open communication about risks that can be controlled versus external risks outside the organization’s influence.

Step 3: Create a Dynamic Risk Map
Dynamic risk maps visually depict the likelihood and severity of risks. These maps are essential for:

• Identifying high-priority risks in the “red zone.”
• Generating a Top 10 Risks list for resource allocation.
• Updating periodically to reflect evolving risks and mitigation efforts.

Step 4: Develop Operational Risk Analysis Models
GM employs models to analyze risk interactions and dependencies. These include:

• Monte Carlo Simulations to evaluate probabilities of risk events.
• Cost-Benefit Analysis for risk mitigation strategies.
• Process Flow Maps to identify vulnerabilities across supply chain networks.

Step 5: Integrate Learnings Into Business Processes
Risk management is not a one-time activity. GM focuses on:

• Addressing actionable risks.
• Building on successes across business units.
• Reporting progress to senior executives.
• Fostering a proactive, risk-aware culture.

Key Insights and Takeaways

1. Enterprise-Wide Risk Ownership
Risk management is most effective when all business units take ownership of their respective risks. For example, supply chain teams must focus on logistics and supplier reliability, while IT teams ensure disaster recovery readiness.

2. Simple Yet Effective Risk Models
GM’s approach relies on straightforward models to:

• Highlight interdependencies in supply chains.
• Quantify the financial impact of risks.
• Provide actionable insights without overwhelming data collection efforts.

3. Faster Risk Mitigation and Resumption
Enhanced coordination and risk detection processes reduce response times. The result is a more robust and resilient supply chain capable of adapting to unforeseen disruptions.

Supply Chain Resiliency and Future Trends

Debra Elkins emphasizes that the future of supply chain management lies in risk-informed operations. Key trends include:

• Supply Chain Redesign: Incorporating modular product designs, dynamic pricing, and revenue management to adapt to risks.
• Beyond Lean Manufacturing: Moving past traditional Just-In-Time systems to embrace flexibility and resilience.

Practical Recommendations for Risk Management

• Be Thorough in Risk Identification: Use risk maps and portfolios to ensure all potential disruptions are considered.
• Prioritize the Top Risks: Focus resources on the most critical threats to minimize impact.
• Empower Business Units: Allow teams to take control of their risk areas and implement mitigation strategies.
• Integrate Risk Management into Operations: Build risk awareness into day-to-day business processes for long-term resilience.