Agility and Scenario Analysis required to tackle supply chain disruptions

Factory Warehouse

Organisations need to be agile and perform scenarios analysis to tackle supply chain risks, argues new report. 

Risk Managers need be prepared to be act ahead of changing conditions, and regularly test scenarios, as they grapple with managing their supply chains risks, is one of the views put forward by a new report by Chubb. 

The report examines the ever-present issue of supply chain visibility that has long concerned business leaders. A recent McKinsey study showed that companies with less than half of supply chain visibility have either no visibility in their lower supply chain or only just their direct first-tier suppliers. 

Supply chain visibility, as the report notes, is coming under additional scrutiny from regulators, through new legislation such as the UK Modern Slavery Act and the upcoming German Supply Chain Due Diligence Act. Legislation that will force businesses to understand and identify their second and third suppliers. 

This is also an issue beyond regulation, with the report noting that 80 to 90 percent of an organisation’s emissions come from outside their direct practice, and can involve small suppliers connected to them. 

Over 40 to 50 percent of supply chain failings for a business are because of mishaps involving small suppliers in the overall supply chain, according to Nick Wildgoose, who contributed to the report. 

This visibility is becoming more crucial, particularly as cyber attackers are focusing their attention on the manufacturing sector. In 2021, the sector overtook financial services, as being the most targeted sector, accounting for 23% of all cyber incidents in 2021 according to IBM. 

The report calls on risk managers to be bold, adaptable and to get ahead of changing conditions, which it believes can be achieved by risk managers regularly preparing and testing alternative scenarios. 

This is a viewpoint that chimes with the conversations that Russell has been having with our clients and members of our corporate working group. What corporates and their (re)insurers want in this challenging environment, is the ability to be forward-looking and know their exposures.   

Post Date: 22/02/2023

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