‘Robust risk management and business resilience strategies are critical to future-proofing supply chains,’ says co-author
Businesses and their brokers must focus on supply chain management as pressure on the supply of goods and materials continues to increase.
Insurer Chubb has published two new reports that illustrate why firms should develop a better understanding of the make-up of critical multitier supply chains to limit the impact of disruption.
The insurer said that man-made and natural disasters, together with geopolitical events – such as Brexit, Covid-19, the Russia-Ukraine war, rising inflation and the risk of a global recession – have caused businesses to experience unprecedented disruption to just-in-time (JIT) supply chain models.
The impacts of disruption include mass labour and goods shortages, container costs, energy access and other local factors such as workforce strikes and port congestion.
Chubb’s report series – entitled The Spectre of Disruption – examined current and emerging supply chain risks and analysed the international supply chain risk landscape.
Peter Kelderman, co-author of the report and marine risk management leader at Chubb Europe, said: “The past few years have taught us that robust risk management and business resilience strategies are critical to future-proofing supply chains.
“This report series demonstrates how important it is for global businesses to have an understanding of the developing exposures across their supply chains and to be equipped with the right strategies and support to reduce their exposure to business interruption.”
The first report in the series examined the developing trends in supply chain disruption, its causes and effects and what these meant for business in the UK and globally.
The second report explored how organisations could build resilience into their supply chains through robust risk mitigation, including strategies to enable risk and supply chain managers to prepare for the unknown, develop risk management capabilities and build operational strength.
“Businesses are being held increasingly to account for actions lower down their supply chains and penalties are rising,” explained the report.
“A better understanding of the make-up of critical multitier chains provides a transparency to stop disruptions that also helps companies comply with legislation, including the UK’s Modern Slavery Act and the upcoming German Supply Chain Due Diligence Act.”
It added that robust supply chain transparency was also fundamental to addressing the growing challenges around climate risk – Chubb explained that between 80% and 90% of an organisation’s emissions could originate from outside their direct operations.
Kelderman added: “With risk management, you are always working on it, making a permanent change until the next one.
“But it is vital to be agile, adaptable and get ahead of changing conditions, not just through inspections, audits and constant reviews but by regularly preparing and testing alternative scenarios.
“Think wargaming and the impact of losing a supplier, rather than focusing on profitability and margins.”