Globalization and its relentless drive for efficiency have led us into a world of long and complex supply chains. Even “simple” products, such as cereal bars, can be made of ingredients from more than eight countries on four continents.
 
Such complexity has led to higher productivity for companies and lower prices for consumers. But there’s also a dark side: Complex systems, with a plethora of suppliers, are increasingly prone to failure and, on occasion, spectacular collapse. Contaminated pet food or peanut products, lead paint in children’s toys, imploding financial products—the list is well known and growing. But in each case, the cause is essentially the same: a failure to guard against suppliers acting in their own interest.
 

Such opportunism often leads suppliers to take advantage of poorly written agreements, or simply break them outright if the risk or cost of getting caught is low. And the deeper they are in the process, the further from the end customer, the less responsibility they are likely to show in the absence of effective controls.
 
This is as true for global financial markets as it is for manufacturers. In the subprime crisis, many financial companies played roles as each attempted to lower costs through increased specialization. The final owners of mortgage portfolios often wound up many transactions and half a world away from the original borrowers. And with each transaction, the sellers of the mortgage-backed products grew less concerned about the risky nature of the underlying debt, or about being held accountable. Opportunistic behaviors went unchecked.
 
Supply chains aren’t going to get any simpler. So companies need to dig into the details of their supply systems to understand their risks, and work to prevent problems. The following checklist is designed to help managers check their own situations for integrity and stability:
 
 
1. Constantly monitor potential risks in the market. Eliminating opportunism is impossible, but that is no excuse for not being vigilant about suppliers and how they meet their obligations. Sometimes managers let their devotion to efficiency prevent them from taking steps to avoid problems, even when new risks are apparent.