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Reduction in the frequency and origin of supply chain disruption

At a glance

  • The latest edition of the Business Continuity Institute’s (BCI) Supply Chain Resilience Report (2019) now in its eleventh year
  • Fewer organisations overall experienced disruptions in 2019, and the number of them experiencing five or more fell to 10%
  • 45% of organisations that experienced supply chain disruptions were unable to quantify how much of those losses were insured

This article counts towards accumulating your annual CII CPD structured learning hours for Business Interruption.

By reading this article, and correctly answering the three questions underneath, you will have achieved the following learning outcome: Summarise the key components of a business continuity plan and/or the benefits of supply chain risk management.

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The latest edition of the Business Continuity Institute’s (BCI) Supply Chain Resilience Report (2019) now in its eleventh year, noted that in the results of the 2019 survey that over three quarters of organisations record, measure and report on supply chain disruptions.

Some of the key findings of the report include:

  • Less than a quarter (23%) of organisations now report that their organisation does not record, measure and report on supply chain disruptions – the lowest figure since Business Continuity Institute’s (BCI) Supply Chain Resilience Report has been published
  • Despite cyber-attack and data breach only causing 26% of disruptions in the past year, it is the most top-of-mind disruption for professionals over the next year with 62% of it rating it as their primary concern
  • 52% of organisations experienced supply chain disruption in 2019 compared to 57% in 2018
  • Incidents involving tier 1 suppliers fell below 50% for the first time since 2016 (49%) although incidents in tiers 2, 3 and beyond saw a small percentage increase
  • 45% of organisations that experienced supply chain disruptions were unable to quantify how much of those losses were insured.

Looking into more detail in the report, it was found that fewer organisations overall experienced disruptions in 2019, and the number of them experiencing five or more fell to 10% (down from 15% in 2018).

One of the more encouraging findings in this 2019’s analysis is that the proportion of incidents occurring with immediate suppliers fell below 50% for the first time since 2016. However, more concerningly disruptions with tier 2 suppliers and beyond are rising. This would point to organisations being better placed to identify potential disruptions within their immediate supply chain, but not translating that insight further down their supply chains. Supply chains are becoming increasingly complex and there is a need for organisations to go beyond their critical suppliers when assessing their potential risk.

With the uptick in organisations recording and measuring supply chain disruptions, it appears to be helping them better predict and manage them when they do occur.

Something that remains a concern is that nearly half of organisations that experienced significant supply chain disruptions were unable to quantity how much those losses were insured. When they were able to assess the financial impact. 57% reported partial insured losses. Large businesses were better covered compared SMEs and professional services had the highest number of losses completely uninsured at 52%.

With supply chains becoming more complex and millions of pounds tied up in supply chains, having adequate insurance is critical for companies both large and small. Whilst insurance is necessary it does not complete the full picture, the complexity of most global supply chains means it would require vast resources to mitigate every conceivable risk at every link in the chain. Effective risk management is therefore about prioritisation. The challenge for brokers and customers is to identity the suppliers with critical exposures and put in place mitigation measures for these suppliers.

Zurich provides a range of support, guidance and tools to help brokers and customers negotiate the increasingly complex world of supply chain risk.

For more information on the issues discussed in this article, please get in touch with your local Zurich contact.

Image © Getty

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