Businesses struggle to manage supply chains: Airmic

Businesses are struggling to manage global supply chains, due to a combination of geopolitical tensions, climate volatility and technological dependencies.

That’s the view of risk management association Airmic in a report, produced in conjunction with AIR Worldwide, Gallagher, HDI, Lloyd’s and Sedgwick.

The report entitled Complex Supply Chains in a Complex World, warns that a desire for low cost networks has led some businesses to turn a blind eye to, or miss, the concentration of risk that may be building up in their supply chain which could result in a catastrophic event that can bring operations grinding to a halt and inflict significant reputational damage.

With supply chains becoming increasingly complex and opaque, many companies are struggling to fully map their exposure, with over half of businesses failing to have visibility beyond their direct, or tier 1, suppliers.

According to the report, recent trends putting greater pressure on supply chains include: The rise of nationalism, increasingly protectionist policies and Britain’s departure from the European Union, which are threatening to roll back free trade, global supply networks and cross-border relationships.

“Most businesses have a good understanding of their suppliers, but how many track their suppliers’ suppliers? The web of relationships in a typical modern supply chain is incredibly complex to unpick,” comments Richard Cutcher, research and development manager at Airmic. “This report is designed to support businesses inject resilience into their entire supply chain.”

Iain Bell, director, Major Risks Practice, Gallagher, said: “Standalone supply chain policies have been discussed for 10 years, but they remain uncommon and take-up is low. Whilst a full risk assessment of the supply chain is necessary before buying a policy, insurers also need to address the buyer’s principal concern, i.e. that any reduction in supply that leads to a loss of output or gross profit is insurable.”