What is risk and how can it be mitigated?
September 1, 2022
By Curt Trnka, Blue Print Editorial Staff, Tony Broersma, SVP of Operations, and Kevin Fitzgerald, VP of Sales Operations
By Curt Trnka, Blue Print Editorial Staff, Tony Broersma, SVP of Operations, and Kevin Fitzgerald, VP of Sales Operations
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Risk means different things depending on where you focus.
Risk is everywhere. It’s hiding in our preparation, it’s lurking in our freight, and it’s even in our air. More on that in a minute, but the fact remains: Risk is unavoidable. However… It can be mitigated. We can get ahead of some of these risks. Let’s look at three different areas. 1. Disaster preparedness
Defining the risk When it comes to a natural disaster or even the recent pandemic, you can think of risk this way. Identify the things that you need to keep your organization going. Anything that would disrupt your operations is a risk. One example: If you have workers on a line or a jobsite and they use N95 masks. We just had a major, unexpected disruption to N95 masks when the pandemic hit. More importantly, interruptions like that have happened in the past. They aren’t new. Defining the risks you face is all about identifying the things that you need to keep your operation up and running. Then, if there’s potential for a disruption, you need to build a plan. Dealing with risk Masks, toilet paper, hand sanitizer. You name it, and there’s been a challenge getting it. This is why you need to build your plan ahead of time. Start by having a team that’s involved with identifying risk and that also has the authority to make decisions. Have them flesh out the plan with options. You want to have a good, better, or best option for anything you have identified as crucial. NOTE: Backup options don’t have to be exact matches. If it has the same form, fit, function, and quality, go that route. But, perhaps most importantly, you need to take action. You should prepare, talk about things, and build a plan, but you need to make some changes and be ready to react. Steps to take When we talk about disasters (and disruption events in general), what we are really talking about is risk in the supply chain. And that always comes back to preparation. Being proactive versus reactive. And part of that is having a team of people that you’ve built in advance to help your organization. They should look at how things may play out from a supply chain standpoint, from a logistics standpoint, and also to just help internally with mitigating risk. Now, it might sound silly, but “practice makes perfect.” Here’s a small example. Usually every year around the May-June timeframe, our “Blue Team Responds” (emergency preparedness) group gets together to walk through hurricane preparedness. What do they do? Because everyone knows when a hurricane is coming, it’s just about making sure everybody is prepared and on the same page with what needs to be done. Finally, the last thing from a preparedness point of view is communication. It is so important to communicate before and during any type of disruption. After you’re past the intensity of the moment, go back and look at what went well and what didn’t go so smoothly. Sad Fact: You’re not going to get in front of everything. But if you can learn from every time risk enters your supply chain, any time there’s a disruption, then it’s just going to make your entire organization better. 
2. Supply chain complianceDefining the risk
With all the challenges the world has thrown at us lately, we’ve all adapted to a myriad of risks. And, in a weird way, each new disruption has helped us. Because with each new challenge, we can categorize a risk into the “what” of the product that we’re going to need, the “when,” and then exactly “how much.” So, to do that, we deal with risk in forecasting quantities, in timing, and in challenges to the supply chain. Regardless of the particular risk, it’s important to ensure you’re securing good, quality product. You need to know where it’s coming from and if there are any ESG challenges that come with it. Dealing with risk These days, supply chains are multinational spiderwebs. A change in a single factory in one country can have a ripple effect. That’s why it’s key to stay aware of the strains on supply chains and the pressures they can put on the compliance side of things. One way to adapt is being able to adjust quickly. Having decentralized teams that have very good controls in place helped Fastenal make sure we made good decisions for ourselves and for our customers. Traditionally, compliance just meant finding quality product from a good factory. And over a long period of time, getting to know that factory, and approving that factory for a specific product mix. For example, you wouldn’t go to a factory that was approved to make nuts and bolts and start buying hi-vis vests or gloves from them. Well, as we went into the pandemic and then again coming out, there was a lot of movement in the supply chain where factories were starting to create new things. They were expanding into new capabilities plus new businesses were opening. For that reason, we have reliable teams that put controls in place to make sure that we weren’t tempted – as we move very, very quickly in a decentralized environment – to ever make a bad decision for our company or for our customers. Steps to take Solutions need to be dynamic, and speed to action is key. So, how quickly can you adapt to disruption? Having incredibly strong subject matter experts – not only in roles but also in locations around the world – allows us to be on the front lines in each of those different environments. We understand what’s going on in the trucking industry, the brokerage industry, the international freight industry, in factories, and in foreign markets. That’s Fastenal’s strength. And as changes happen in the supply chain, each of those teams is in a decentralized situation. This means they can pivot, adjust very efficiently, and react to challenges pertaining to their area. A lot of companies talk about the most important things they did during and coming out of the pandemic. And you’ll notice there’s never a silver bullet where they talk about a particular computer program, a particular process/SOP or anything like that. Really, what surfaced over and over again were companies talking about how great their people were. So, it’s absolutely about having great people in different locations who are able to problem solve at scale. 
3. EHS & SustainabilityDefining the risk
When we think of risks in the areas of sustainability and environmental, health, and safety, data is king. Reputations are on the line. Investors want to see progress, and data is the key to building trust and showing improvements. Dealing with risk Shifting thought processes can be powerful. Too often cost savings and EHS are perceived as conflicting initiatives. That false narrative is holding people back from finding cost savings. There are many opportunities to drive EHS initiatives that directly drive bottom line cost savings, even outside the EHS considerations. One example is literally in the air we breathe. If we move from regular air filters with an estimated lifespan of six months to a high-quality one that lasts a year, we just won three times.
Now, do you have the system in place to capture that positive change? Steps to take Finding the right path forward is different for every organization, but these often apply. Can you upgrade to premium versions of standard consumables? We often think of gloves as just gloves, but there’s a wide range of options. See if your team could upgrade to a longer-lasting version. Where can you reduce energy usage? Energy costs are rising. One option: Switching to more efficient lighting will reduce the amount of energy consumed, which means fewer emissions and lower costs. Are you reviewing internal and external KPIs and safety performance? Too often people focus on just one or the other. Also, if you aren’t already using third-party verifier sites, they can be useful to vet the performance of business partners. In environmental, health, safety, and sustainability, it’s all about being prepared for whatever may come up, whether it’s an OSHA inspection or emergency preparedness. Be ready whenever the need arises. 
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