Disasters, Disruptions and Beyond: When Insurers/Risk Managers Invade Procurement/Supply Chain

Even though we cover supply chain risk extensively from procurement and supply chain perspectives on Spend Matters, we don't spend much time looking at it from an underwriter or risk manager's point of view. Therefore, you can pretty much guess we'd find an analysis such as this one from Business Insurance quite useful reading. Commenting on recent disruptions in Asia, one source suggests that, "the problem for insurers who provide business interruption cover to Japanese manufacturers is that they have to cover the losses stemming from the Thai flooding because so many businesses moved some or all of their supply chain there." Another insurer is quoted saying that the "slow developing" situation coming of the "Thai catastrophe makes it difficult to get a handle on the extent of losses."

An increasing number of insurers and brokers are getting in on the supply risk game. Yet with losses mounting, underwriting standards will undoubtedly need to be revisited. Spend Matters previously covered Marsh's underwriting efforts, noting that they will write policies that encompass named suppliers, named supplies or named services (e.g., logistics). Yet as part of the underwriting process, one of the major steps to get the carriers over the fence is the ability to create a measurement system for risk in addition to proving the size of the market based on actual need for such insurance products in the first place. Now, with supply chain risk causing much greater losses than in any recent memory, the market need is no longer in question and even common shareholders are asking about exposure and supply chain risks, as the article suggests.

If you're curious to read more about the topic of supply risk, download our recent papers on the subject at the end of this post. Without question, technology can -- and should -- play a significant role in helping offset the added risks of lengthier supply chains with greater regional and global interdependencies.

The Intersection of Analytics and Supply Chain Risk Management -- Using Intelligence to Drive Early Intervention

Leveraging Supplier Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR

Supply Risk Management: Segmenting the Technology and Content Landscape

Beyond Basic Scorecarding -- Supplier Performance and Development Approaches to Drive Competitive Cost and Risk Advantages

Supplier Management Market Observations: Recent Trending, Musings on SAP's Core Offering and General Deployment Pitfalls (for all Solutions) to Avoid

- Jason Busch