The connection between the health of the supply chain and the health of the insurance industry is rarely as visible as it is when the former is under pressure. Today, between geopolitical strife, strategic sourcing shifts, and ever-evolving tariffs, sanctions, bans and other restrictions, supply chain leaders are facing a complex and highly interconnected risk environment.
The supply chain has a significant impact on how goods and services are produced, distributed, and delivered to end customers. And while the impact of supply chain challenges is more evident in some industries - including manufacturing, retail, agriculture, healthcare and pharmaceuticals - all industries are impacted to some degree. As a result, disruptions to the global supply chain network can cause significant operational, financial and strategic issues.
Recent years have brought multiple significant shocks to the global supply chain. Most notable was the COVID-19 crisis which caused labour shortages, global trade disruption and a shortage of semiconductors which had knock-on effects on both the automotive and consumer electronics sectors. Bill Bradshaw (pictured), London operations manager for FM – formerly FM Global – highlighted how post-COVID supply chain disruptions are continuing to impact clients across the UK, the Nordics and the Middle East.
It’s a complex risk landscape, he said, further complicated by spikes in energy prices and inflationary pressures. And while some of the more pressing supply chain issues facing organisations have started to ease in recent months, there remain some areas of real concern today. “For instance,” he said, “if you’re trying to get a specialist transformer for your electrical subsystem, it may take longer than it would have even just five years ago.
“What we’re also seeing, whether as a direct result of COVID or not, is that a lot of the expertise that was out there in some of the supply chains has retired early. So, if you’re looking for some of your equipment to be serviced, it may take longer, and you may not be able to access the same quality of personnel, which leads to its own issues.”
Whether it’s changing labour dynamics, access to critical supplies, economic volatility, environmental concerns, technological advancements, regulatory challenges or supplier risks, companies are facing several key pressures. Solving these issues for the supply chain requires a multi-dimensional approach, including companies making the right investments in the right technology, enhancing supply chain visibility, diversifying supplier bases and adopting more sustainable practices.
Given current economic conditions – which remain turbulent despite inflation easing slightly in recent months – companies need to invest in the resilience of their equipment because, if it breaks down, it’s going to be harder to fix, it’s going to take longer to fix and the whole process is going to be more expensive. “Really, the focus has to be on keeping your equipment in the best possible shape; well-maintained and operational and having redundancy measures built in if it’s critical to your operations,” Bradshaw said.
It’s the question every business needs to be asking itself: what are my mission-critical systems and tools, what are my most significant exposures, and how can I use this information to embed greater resilience across my entire organisation?
Understanding the link between resilience and minimising supply chain risks also shines a light on wider supply chain management themes, as recent events have highlighted that a ‘just-in-time’ approach often does not allow for the ‘black swan’ events that have dominated global headlines in recent years. Unless clients have the resources to build in massive amounts of redundancy into their systems, it’s too hard to protect a business against sharp shocks to the supply chain, such as geopolitical unrest incidents or cyberattacks.
What has been encouraging to see, according to Bradshaw, is the growing emphasis being placed on resilience measures across the insurance industry, and the focus on communicating that message to insureds. There was a time when insurance ran the risk of being very transactional due to its inherent nature of offering coverage for premium, he said. However, the changing world of insurance and the changing nature of risk means that insurers and businesses increasingly understand that this approach is not sustainable. “Resilience is what we’re all about,” he said. “[It’s] about how we can protect today for a better tomorrow.
“So, we’ve always invested time, energy and resources into understanding risks and helping our clients manage those risks, now and in the future… And it all comes back to quality of data, conviction of message and being passionate about wanting to help your clients.”
