How Supply Chain Disruption Affects the Financial World
- October 21st, 2014
- By: Scott Robinson
A common concern of global insurance firms is, unsurprisingly, the financial impact of supply chain disruptions. An industry risk assessment published earlier this year stated that 43 percent of corporate insurance experts consider the business interruption of supply chain disruption to be their most significant concern.
Always a concern for supply chain participants themselves, supply chain disruption has downline impacts that have financial consequences on other business entities.
The financial losses that can result in a local economy due to supply chain disruption are so concerning to global insurance analysts that they actually top natural disasters and fires in importance. Business interruption, the report stated, accounts for 50-70 percent of insured property losses.
“As supply chains are becoming increasingly complex in a global sourcing world, any disruption – for example due to natural catastrophes, IT/telecom outages, transportation issues, a supplier’s bankruptcy or civil unrest – can lead to a snowball effect,” said Paul Carter, global head of risk consulting at Allianz Global Corporate & Specialty (AGCS), said recently.
“Business continuity planning is key and should be part of any company’s procurement and supplier selection process. Yet, to ensure appropriate mitigation measures can be implemented, it is no longer sufficient to know your ‘critical’ suppliers; you also need to have a grasp of how they manage their own supply chain exposures,” Carter concluded.