Narrowing supply chains create business continuity risks

Business continuity risks are heightened as global manufacturers cut costs by narrowing the supply chain, making it crucial that risk managers understand the function of each link on the supply chain, warns Lloyds.
Traditionally firms cant insure against business interruption losses such as flooding to infrastructure they dont control, Dan Trueman, a Lloyds underwriter at Kiln specializing in trade disruption and consequential loss, said in a Lloyds release.
But they will affect things like distribution and could make a dent in the profits.
Alex Hindson, associate director of Aon Global Risk Consulting practice, warned in the release that as manufacturers cut costs by narrowing the supply chain they are also putting business continuity at greater risk.
Firms need to understand that there is a trade off when it comes to narrowing the supply chain, Hindson told Lloyds.
What firms should be doing is mapping the supply chain, looking at what spare capacity they have, and then assessing how long it would take for the business continuity plan to kick in, he added.
Trueman noted that the key challenges facing the business continuity plan are the logistics of understanding the business structure and the roles which different people have within that structure.
Understanding the function of each role within the supply chain and stress testing the plan for weaknesses is essential, he said.