Large cargo losses are having a significant impact on the marine insurance sector, says Nick Derrick, chairman of International Union of Marine Insurance's cargo committee. He spoke in Berlin, at IUMI's annual conference.
With a tentative agreement in place between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), the 7-month-long West Coast port crisis has come to an end. What comes next is the final body count - what percentage of GDP shrank because of the slowdown? What was the impact on the trade deficit? Who got hit hardest, and just how hard? Then what? There may be a collective sigh of relief in the air, but can things really go back to normal? Should they?
The globalization of today's economy means that businesses are more interconnected than ever, creating a greater risk of business interruption, supply chain disruption, and exposures that can quickly multiply.
Global supply chain risk reached an 18-month low in Q2 2014, decreasing for three consecutive quarters for the first time since the 2008 financial crisis, according to the Chartered Institute of Purchasing & Supply's (CIPS) latest CIPS Risk Index (CRI).
As manufacturers seek to source quality goods at the lowest cost, supply chains that were once confined to a single country or continent have stretched around the world. Managers have become adept at addressing recurrent risks—frequent, low-impact incidents such as demand fluctuations or supply delays that affect efficiency. However, they have devoted less energy to designing supply chains that prevent or mitigate the impact of disruptive risks such as labor strikes, political unrest, regulatory shifts, and natural disasters. These events can have severe and lasting repercussions on operations, so manufacturers would do well to devise strategies that alleviate this risk.
Business interruption and supply chain risks remain atop a list of the major hazards drawing companies' attention this year, according to the recently released Allianz Risk Barometer, a survey of some 400 of the firm's corporate insurance experts from more than 30 countries. Insurers are starting to pay much more attention to supply chain when underwriting industrial risks, the global insurer says.
As the saying goes: "One does not get promoted based on cost avoidance."
One of the reasons is that costs avoided do not show up on financial statements. On the other hand, costs incurred - including security outlays - are visible, and often become prime targets for the CFO's cost-cutting knife.
Almost two thirds of businesses have experienced disruption to their value chains as a result of events beyond their control, according to an Oracle survey of large organizations in the Europe-Middle East-Africa (EMEA) region.
As a tier one automotive supplier, Active Tools International knows the importance of avoiding and mitigating supply chain disruptions. Bill Keller, president of global operations, says the company has developed written risk mitigation plans that emphasize the use of dual sourcing of parts.