During a webinar interview, a Fortune 500 risk manager was asked what kept her awake at night. “Supply chain risk,” she answered.
With increasing globalization and fewer sourcing options as companies fold or merge, supply chain risk management has become a necessity. When properly managed and insured, your supply chain management process can give you an advantage.
The top three supply chain risks include natural disasters, telecommunications and information technology problems, and supplier delivery problems. Here are a few tips to help you manage supply chain risk:
- Analyze the risk associated with untested or geographically distant vendors. Fuel cost volatility and international piracy may be very real threats to your global supply chain.
- Perform due diligence on new suppliers. Seek expert advice about potential vendors before you sign any contracts.
- Strike the right balance between increased risk and competitiveness. Saving money by switching vendors may seem like a good decision until you lose money or damage your company’s reputation because the arrangement fails.
- If your brand is tarnished, it may take your management team years to repair your organization’s reputation. Evaluate each link in your supply chain.
In the past, physical damage to your assets had to occur before insurance coverage would apply; now insurance carriers offer more comprehensive supply chain coverage. Perils such as pandemics, civil unrest or the loss of a supplier may all be insurable.