Business can control their risk exposure by developing a better understanding of multi-tier supply chains to limit the impact of disruption, according to a report from the British insurance giant Chubb.
Chubb released the report as businesses have experienced unprecedented disruption to their just-in-time (JIT) supply chain models in recent years, due to both man-made and natural disasters, along with geopolitical events like Brexit, Covid-19, the Russia-Ukraine war, rising inflation, and the risk of a global recession. The impacts have hit labor and goods shortages, container costs, energy access, and other local factors such as workforce strikes and port congestion, Chubb said.
In that environment, robust risk management and business resilience strategies are critical to future-proofing supply chains, Chubb said in a summary of the full report. The paper identified a series of questions that supply chain managers should be asking to develop those capabilities.
First, companies need to understand exactly where their risks lie by mapping the full supply chain and all business processes. That step should help them develop a formal, written business continuity plan (BCP), which is comprehensive and quick to implement in order to minimize operational downtime.
Chubb also found that businesses can build resilience to the challenge of a failed supplier by increasing inventories and accounting for longer repair times. Additional strategies include sourcing from multiple vendors to add flexibility, shortening supply chains to reduce vulnerabilities, and investing in local warehousing and production.
In pursuit of those goals, Chubb listed five questions that businesses should ask themselves:
- have you established appropriate capabilities to assess supply chain exposures?
- has an analysis been conducted to identify supply chain risk accumulations?
- are you confident that the effectiveness of your supply chain resilience strategy can be demonstrated?
- has your organization implemented a business continuity management system to a recognized standard?
- have you created a suitable budget to support business resilience measures?
"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," Peter Kelderman, Marine Risk Management Leader for Chubb Europe and co-author of the report, said in a release.
The full report is available online.
