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Deloitte Global Supplier Risk Monitor 2021

Early risk detection and proactive transformation in the COVID era and disruption in the automotive industry

The global pandemic hit the automotive industry particularly hard – and the timing could not have been worse. Suppliers now face not only the adverse effects of the crisis, but also the challenge of transforming the automotive value chain. Without a deep understanding of the various business and market risks in this difficult environment, they may find themselves unable to initiate countermeasures in good time. These are the key findings of Deloitte’s most recent Global Supplier Risk Monitor. This risk analysis framework for automotive suppliers identifies the biggest challenges for each specific vehicle component and offers potential solutions.

Automotive suppliers and the industry as a whole face the fallout from COVID-19 and structural transformation

There is no doubt that these are troubled times for the automotive industry. Since 2019, and even more so after the COVID-19 outbreak in 2020, there has been a serious decline in the sales of passenger cars. At the same time, the share of new energy vehicles has risen sharply. The stock prices of legacy OEMs have plummeted as a result, while those of Tesla and other new competitors in the e-mobility space have soared to unprecedented heights. Even though the pandemic is not the sole driver for these trends, it has put into sharp focus the existing risk factors and the structural trends that were already facing automotive suppliers.

Two-pronged challenge with digitalisation and EVs

The current environment poses huge challenges for many suppliers. If they are too slow to embrace the latest technology and consumer-driven trends or to comply with new regulations, they run the risk of failing. This is particularly true for the specific challenges associated with digital transformation and electric drive systems. Components for internal combustion engines are coming under more and more pressure as electromobility gains traction. The level of risk varies from supplier to supplier:

External risks are largely beyond the control of a company and its management, e.g., competitive pressure or regulatory changes impacting a company’s current or future performance.

Internal risks are within the company’s control in principle and serve as either a multiplier or a mitigator for external risks. While external risks impact all companies equally within a particular vehicle component cluster, no two companies will have the same internal risks.

Given the radical changes on the market and the distinctly different risk profiles of individual companies, which may change drastically at any time, the ability to detect and properly prepare for risks is essential to future business success. A combination of scenario-based thinking and strategic actions is crucial in this context. It helps suppliers, their customers and their capital providers take a proactive approach to identifying risks and responding to potential threats with a prioritised set of mitigating measures.

Helping suppliers set the right strategy

Deloitte developed the Global Supplier Risk Monitor to support suppliers in the strategy development process. It divides the automotive supplier market into 19 vehicle component clusters using the same approach we introduced in our study series “Future of the Automotive Value Chain”. The objective is to identify cluster-specific risks, outline their potential impact and develop potentially mitigating measures. As a result, automotive suppliers and their key stakeholders – from OEMs to funding partners – gain the insight they need to manage today’s risks and minimise their impact tomorrow.

Classification and methodology: risk analysis framework for automotive suppliers

With the Global Supplier Risk Monitor, suppliers can systematically monitor risks over time in 19 separate clusters. The monitor assigns each of these clusters a value between 1 to 5 in three internal risk categories and three external risk categories. The external risks comprise market structure and pressure, the regulatory and societal environment, and future market relevance. The impact of these external factors will be the same for all companies within a cluster, but their internal risks will vary considerably. These range from cash-generating power and adaptability to credit ratings and the capacity for innovation within the cluster.

The value assigned to each risk category also factors in other risk indicators identified through the extensive research and industry expertise of Deloitte experts. We can therefore say with confidence that our assessment of the risks identified for a specific cluster is based on comprehensive, continuously updated information.

This approach gives companies a solid foundation on which to build their risk identification and mitigation strategy. Based on its position within the risk matrix, we can develop our initial hypotheses about the origin or primary driver of each risk and brainstorm mitigation initiatives.

The highest and lowest risks for automotive suppliers

The biggest risks facing automotive suppliers can be found in the vehicle component clusters that focus on internal combustion engines and exhaust systems. Due to declining market volume, a high level of consolidation and strong negative effects from government regulation, the ICE (Internal Combustion Engine) cluster currently has the highest external risk. The highest internal risk we identified is in the Axles component cluster, a segment with low profits and poor balance sheet management.

The lowest risks are clearly in the ADAS &Sensors and Electric Drivetrain clusters. Among the five most stable clusters, ADAS & Sensors has the lowest risk in five out of six risk categories. This is mainly due to how companies within this component cluster scored in adaptability, capacity for innovation and credit ratings.


To achieve success over the long term, suppliers, their customers and their capital providers must establish a continuous, systematic approach to monitoring and assessing both internal and external risks. This requires a structured methodology designed to identify risks at an early stage and respond with the right mitigation measures.

We update Deloitte’s Global Supplier Risk Monitor on a regular basis and offer valuable support in risk assessment as well as use cases to illustrate the practical applications of the framework.

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