Fundamentals of Risk Management

strategic partnerships
When setting up arrangements to outsource part of its operations, an organization 
will need to consider very carefully the selection of each strategic partner. For

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supply chain management
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example, the production of an in-house magazine will be outsourced by many
organizations. Depending on the importance placed on this magazine, an organiza-
tion may wish to set up a strategic partnership with the publisher.
Supply chain risk management becomes even more important when production 
activities are involved. When a supermarket sets up an arrangement for the supply
of manufactured goods, there are many considerations. The ability of the supply 
chain partner to deliver the required goods on time and within the agreed cost on
a sustainable basis will be a key consideration.
In order to secure exclusive supply, a supermarket may wish to enter into strategic 
partnerships with its suppliers. These strategic partnerships will result in the super-
market receiving priority treatment in the event of potential disruption to supply. 
The benefit to the supermarket of this arrangement is that continuity of supply is 
guaranteed and costs will be reduced. For the supplier, the benefits will be a secure 
market for its goods and a long-term contract. The disadvantage for the supplier is 
that the price may be fixed, even though the supplier could obtain a better price on 
the open market from time to time. There is a further disadvantage that the supplier 
may be dependent on orders from only one customer.
With increased focus on cost and use of ‘just-in-time’ delivery, single supplier
arrangements may increase the risk of business interruption. Although organizations 
will wish to limit potential losses by purchasing insurance, it is unlikely that tradi-
tional insurance will adequately protect the reputation and market share of the
organization in these circumstances. Therefore, organizations will need to look at 
business continuity strategies and developing strategic partnerships. These issues
explain why greater emphasis is being place on organizational ‘resilience’ and this 
emerging topic is discussed further in Chapter 9.
Strategic partnerships are very useful alliances formed for the benefit of stake-
holders. They can sometimes involve two competitors working together. A good
example of this type of partnership is described in the text box below. 
When International SOS and Control Risks joined forces in 2008 to tackle some of the biggest 
emergencies on the planet, they proved a centuries-old adage: ‘two heads are, indeed, better 
than one’. The partnership resulted in joint mitigation risk services that provide travel security 
and medical assistance for clients around the world. Specialist execution units offer advanced 
security training, risk forecasting and emergency support worldwide; assistance centres and 
regional aviation units provide evacuation services in 150 countries. 
Control Risks had a vision for medical security as well as security for ex-patriots, and we 
viewed SOS as competition in our new turf. We had clients who were seeking emergency medical 
support and security planning from the same association, so we looked at partnering options 
and approached SOS, which had clients looking for a similar combination of services. We decided 
not to give it its own separate name and identity: it is International SOS/Control Risks.
www.strategic-alliances.org 
Importance of strategic alliances 

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