In our third exclusive installment of Crawford & Company®’s new report, Scenario planning and adapting to emerging risks—a risk manager’s essential guide, we consider whether corporates can absorb weak links in their multi-tier supply chains.
Ample evidence suggests that supply chain vulnerability can have serious consequences for business continuity, with various data indicating how billions can be wiped off a balance sheet when a break in the chain occurs. For example, the Allianz Risk Barometer in 2014 cited that business interruption and supply chain related losses typically account for 50 to 70 percent of insured property catastrophe losses and cost companies as much as $26 billion a year.
In the Guide, Ian Hasson, Crawford®’s head of Forensic Accounting, Europe, explains how catastrophes affect businesses the most, due to scale of the events, the number of policyholders affected and the different policy responses.
“Ultimately, this leads to firms experiencing uninsured losses if they rely on suppliers within the affected regions but don’t hold contingent business interruption insurance,” he said. “However, it’s also important to acknowledge that even where suppliers’ extensions were in place, the coverage doesn’t typically extend to second-tier suppliers.”
Hasson further highlights that insurers help organisations sustain operation with multi-tier suppliers by developing bespoke supply-chain policies that provide broader coverage below first-tier suppliers. At the same time, companies should analyse their supply chains and avoid creating unreliable links.
About the Guide
Prior to this year’s Association of Insurance and Risk Managers in Industry and Commerce (Airmic) Conference, Crawford developed a unique report to guide risk managers on scenario planning and adapting to emerging risks.
To download a full copy of the report, go to http://uk.crawfordandcompany.com/media/1859065/a-risk-managers-essential-guide-claim-trends-and-emerging-risks.pdf.