February 28, 2023 by Alyssa DiSabatino
Many businesses are still recovering from supply chain disruptions that shocked them during the height of the pandemic, and 80% of firms said a lack of insurance solutions is among the greatest challenges to addressing their risks, according to a WTW survey.
This is despite 89% of firms acknowledging that insurance for supply chain risks is ‘mission critical’ or that some cover is necessary, according to the 2023 Global Supply Chain Risk Report, which surveyed 800 senior decision-makers globally (including 275 from North America).
“The pandemic highlighted the gaps in insurance cover, with pure economic losses resulting from shortages and delays not covered by property and marine cargo policies,” the report said.
“Managing these exposures is a major issue for companies, especially in a market that is likely to harden further in difficult economic conditions over the [next] year or two.”
However, nearly half of companies (48%) said the root causes of supply chain risks are somewhat within or completely within their control. Even more (71%) said they have some influence over the quality of supply chain risk management.
Another half (47%) said upstream risks, such as sourcing raw materials, are greater risks to the organization. Only 19% said downstream risks, such as logistics and shipping, are greater. And, one-third (33%) said upstream and downstream tasks carry equal levels of risk.
Across all firms, respondents said the biggest risks to the supply chain are economic risks, pandemics and cyber risks.
“Economic and financial instability is expected to put pressure on supply chains throughout 2023,” the report read. Plus, 32% said economic risks are among their top concerns. Inflation was also named among the leading risk contributors at 26%.
A majority (60%) placed pandemics among the top global trends affecting their supply chain risks, even as the survey was conducted in Nov. and Dec. 2022.
Legacy issues stemming from the pandemic, including continuing shortages of raw materials (39%), logistics and warehousing (35%), components (33%), and drivers (28%) were among the top supply chain factors that respondents said would impact businesses in the next two years.
And as many businesses digitize, the risk of cyber-attacks rises. Respondents said knock-on impacts from cyber-attacks — such as delays in ordering and delivery, and business interruption — can have the most profound impact on supply chains. Some 34% of respondents said it has a high impact and 54% described the impact as ‘medium.’
But businesses have options to manage their supply chain risks.
Measures businesses believed they can take to manage their risks include developing a detailed understanding of supplier networks (59%), improving relationships with suppliers and customers (54%) and developing a detailed understanding of their supply chains (51%).
Feature image by iStock.com/B4LLS