It’s no secret: Over the past decade, many organizations across nearly every business discipline have been impacted by supply chain disruptions, leading to recalls and cancellations while costing hundreds of dollars. million dollars.
Supply chain risk management is about more than protecting a business or its leaders from unknown or unforeseen disruptions. It helps both enhance and improve supply chain resilience and efficiency. As global supply chains become increasingly integrated and complex, strong and effective risk management is essential.
From an insurance and risk management perspective, various supply chain issues plague all industries, including:
- The consequences of COVID-19
- Increasingly volatile weather conditions due to climate change
- Potential massive financial losses, regulatory issues and reputational damage associated with cyberattacks
- Software issues, including the recent CrowdStrike issue
- The trade war between the United States and China is pushing manufacturers to rethink their supply chain strategies
Address risk factors
The development and implementation of supply chain risk management programs must consider two factors: known risks and unidentified risks.
The first type of risks may include the financial strength of a company, the products it manufactures or the markets it serves, and the rigor and robustness of cybersecurity programs. Organizations that successfully manage these risks use tools such as planned and controlled problem management and scenario training, a crisis playbook, and a robust digital platform with a comprehensive view of their risk portfolio.
Some unidentified risks can be difficult to assess, even across hundreds of scenario-testing events, such as the discovery of a cybersecurity breach by a vendor’s vendor, a massive road collapse or a train derailment. The best way to manage unidentified risks is to foster a culture of risk awareness throughout the organization, one that enables its employees to perceive and respond quickly to an external problem.
A crucial aspect of any risk mitigation strategy to manage supply chain risks is establishing a solid technology foundation. The combination of advanced data analytics, machine learning and artificial intelligence (AI) allows organizations to better anticipate disruptions and take proactive actions.
For example, open source intelligence provides insight and visibility into suppliers and transportation companies involved throughout the supply chain. Additionally, the Internet of Things (IoT) provides real-time visibility into operations throughout the supply chain, increasing transparency and thereby enabling faster response times.
An investment in solutions, such as those that provide real-time information on critical elements, including supplier capacity, transportation factors and inventory levels, is invaluable in making the best decisions when faced with problems. supply chain.
Products and solutions
The industry continues to develop exceptional products and solutions to help customers manage their risks regarding supply chain issues.
Among these is political risk insurancewhich can help mitigate supply chain risks for businesses from a geopolitical perspective.
Another important solution is cyber insurancewhich helps mitigate exposure by providing coverage against data breaches, hackers and other digital threats. As it is no longer a question of “if” but “when” a cyber incident will occur, insurers must take a tailored approach with their customers, including meeting with company management and IT departments to help them develop and implement programs that will better protect themselves and the organization against this threat.
Additionally, whether a publicly traded company, a large multinational organization, or a sole proprietor, financial lines products and solutions protect organizations and their leaders from the professional and financial risks associated with supply chain disruptions. These would include insurance offerings such as professional liability insurance, directors and officers liability insurance, employment practices liability insurance, errors and omissions insurance and cyber liability insurance. , among others.
Other essential products to consider include coverage of time elements and coverage of conditional time elementsboth of which help protect businesses from supply chain issues on a direct damage basis, and terrorism insurancewhich covers losses resulting from acts of terrorism, including those that cause supply chain disruptions.
When used in conjunction with comprehensive planning, implementing cutting-edge technologies, attracting and investing in top talent, and cultivating and maintaining strong partnerships, these products and solutions can help businesses to better protect themselves when managing supply chain risks.
About the author:
Marc Dantuono is director, real estate manager, for MSIG United Statesthe American subsidiary of MS&AD Insurance Group Holdings, Inc.one of the world’s leading property and casualty insurers.