BT 2014 Annual Report Download - page 57

654 The Strategic Report
Delivering our strategy
Supply chain
We aim to harness the capability, diversity and innovation of the
global supply market to add value to our business and customers. The
integrity and continuity of our supply chain is critical to our operations
and therefore a signicant risk to our business.
We are committed to ensuring that all dealings with suppliers, from
selection and consultation through to contracting and payment, are
conducted in accordance with our trading and ethical policies. See
Suppliers on page 29.
We have a number of suppliers that we have identied as critical. The
failure of one of these suppliers to meet its obligations could cause
signicant harm to our business.
Impact
While the sie of the impact from a supplier failure can vary, all supplier
failures typically result in an increased cost to our business and have
the potential to adversely impact customer service and our brand. In
many cases, the costs associated with the failure of a critical supplier
could be signicant, particularly if this results in our having to change
technology. If we are unable to contract with an alternative supplier,
our customer commitments could also be compromised, possibly
leading to contractual breach, loss of revenue or penalties.
A failure in our supply chain to meet legal obligations or ethical
expectations could adversely impact our reputation or possibly lead to
censure, legal action and nancial loss.
Changes over the last year
Economic conditions in certain markets and geographies continue to
challenge some of our suppliers. Recent events in other markets, such
as the food supply and clothing industries, have highlighted the need
to explore risks further down our supply chain, beyond our immediate
suppliers. Protecting our brand from events in the supply chain, such as
corrupt practices, the sourcing of conict minerals or possible human
rights abuse, continue to demand a high level of focus.
Risk mitigation
We conduct supplier risk analysis as part of our sourcing strategy,
and where possible, take actions to reduce risk, such as through
dual-sourcing where appropriate.
We operate a comprehensive in-life risk management programme
that recognises the suppliers criticality to BT and checks that the
appropriate level of supplier governance is in place across the group.
We regularly scan our suppliers for changes in commercial, nancial,
ethical, security or performance risks. This enables emerging risks to
be addressed before they develop into issues while also ensuring that
business continuity plans are in place to prevent repeat events.
This approach has been complemented by controls on our low spend
suppliers that ensure we achieve maximum business benet from
them, but at the same time do not contract with too many suppliers
which would expose us to unnecessary risk.
By adopting these approaches, we seek to minimise the risk of not
meeting our customer and legal commitments, or not complying
with our ethical policies. This helps to reduce our exposure to loss of
revenue, nancial penalty or any adverse impact on our brand and
reputation.