Category Archives: Business Interruption

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Recovery Tips in the Wake of Hurricane Ian and Hurricane Fiona

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Across the Caribbean, Florida, and up the Eastern seaboard to Atlantic Canada, communities are facing devastation from a recent—and ongoing—spate of mid-season hurricanes.

Ian follows right on the heels of catastrophic damage from Hurricane Fiona. In the Caribbean, 20% of residents in Puerto Rico are still without power after Hurricane Fiona, and the island took another pummeling from Hurricane Ian while it was a Category 4 storm. To the north, post-tropical storm Fiona inflicted catastrophic damage across parts of eastern Canada last week, causing devastating property damage and leaving hundreds of thousands of Canadians without power. While it is too early for complete estimates, ratings agency DBRS Morningstar projected the insured losses may fall in the range of $300 million to $700 million. According to Patrick Douville, DBRS’s vice president of insurance, “Fiona will likely be one of the largest catastrophic events in history for Atlantic Canada.”

Once it is safe to do so, risk managers will have considerable work to do to help their organizations and communities recover.

Dalton advised, “Additional steps businesses should take include engaging a professional claims preparation firm to help document the claim, preparing a daily timeline of impact and changes to operational activities, asking for a cash advance, and setting up a cost tracking code and/or general ledger account to capture incident-related expenses. If it’s a contingent loss, meaning operations are down because of physical damage to a customer or supplier, ask that customer or supplier send you documentation of their physical damage and ask them to communicate with you as much as possible.”

In the July/August cover story from Risk Management Magazine, “Hurricane Claims: Key Tips to Minimize Losses and Maximize Recovery,”attorneys Andrea DeField and Alice Weeks offered guidance on steps for risk and insurance professionals to take before, during and after hurricanes, including hurricane preparation and response checklists.

For organizations impacted by this season’s storms, the following post-storm tips can help risk professionals navigate disaster recovery and the claims management process:

Post-Storm Checklist

  1. Gather insurance policies and related insurance records. If your policy was destroyed or is lost, contact your insurance company or agent/broker to request a copy.
  2. Contact other business partners who may have copies of your insurance policies and records, such as attorneys and accountants.
  3. Give written notice to your broker and insurer immediately. Notice should provide the following basic information:
    1. Name and address of insured
    1. Location of loss
    1. Date and time of loss
    1. Contact name, phone and fax number
    1. Brief description of the loss
  4. Acquire copies of police or fire reports from your local police or fire department, if applicable. If individuals caused damage to the premises or stole anything in the wake of the disaster, obtain a separate police report about the damage or losses or request that additional information be added to the initial report.
  5. Secure vital records and ledgers. Ensure that your accounting department opens a separate general ledger for hurricane-related expenses.
  6. Collect photos or videos as proof of damage. Ensure these are taken before any mitigations are implemented so that they accurately capture the aftermath and losses.
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  7. To the extent possible, take steps to mitigate any further damage once the storm has passed.
  8. If you have not already, retain a forensic accountant to begin preparing your business income and extra expense loss calculations.
  9. Prepare a proof of loss. A proof of loss provides details identifying the property destroyed or damaged, and documents the amount of loss incurred. Generally, any information substantiating the claim can become part of your proof of claim, including photos, videos, receipts and records. Check with your insurer for the specific information required as some companies may ask for a detailed list of documents or require you to fill out a specific proof of loss form.
  10. Submit proof of loss, photos, and reports to your insurer. Be sure to check any time limitations on the submission of a proof of loss and request an extension, if needed.
  11. Assist with the insurance company’s investigation. Property policies typically allow the insurer to conduct a reasonable investigation of the claim and require the insured’s cooperation. This may be in a provision titled “Duties in the Event of Loss” that allows the insurer to interview the policyholder claimants in a process called an “examination under oath.” The policy may also require the insured to exhibit the property, take reasonable steps to protect it, and generally cooperate with the insurer’s investigation. The insurer’s requests for information must typically be considered reasonable, however. A policyholder’s failure to reasonably cooperate could be used by the insurer as a defense to coverage.

Navigating the Supply Chain Crisis

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Two and a half years since COVID-19 emerged and set off a sea change in how we work and live worldwide, business leaders continue to grapple with the challenges it has created for the global supply chain. Extraordinary congestion at critical global ports, decreased availability of key raw materials and component parts, rising freight bills and an increasingly tight job market have all contributed to the need for companies to create an effective logistics risk management program. Such a program must focus on the detailed assessment of key risks to the supply chain and the creation of mitigation strategies that limit their impact on a company’s ability to satisfy its customers.

How Did We Get Here?

To better prepare an organization for the future, it is important to reflect on events in the past. Some of the critical issues that have contributed to the unparalleled supply chain pressure within the logistics world include:

  • Increasing reliance on foreign suppliers for key inputs, adding to the time it takes to secure goods and also leading to a diverse range of exposures that could impact customers
  • Greater dependence on ever more sophisticated components
  • Labor shortages impacting the transportation and port industries
  • Crumbling infrastructure, especially domestically, contributing to increased time and expense to move freight
  • The continued movement to just-in-time procurement, leading to challenges matching supply to demand as supply chains are strained
  • An increasingly sophisticated electronic network to plan, monitor and maintain the logistics chains, leading to increased vulnerability to cyberattacks

While these issues may have been the fuel, it is certainly the COVID-19 pandemic that was the spark for the current challenges facing the supply chain, as the pandemic affected the global supply chain in many ways. For example, reductions in production capacity overseas due to government quarantines left many components in shorter supply.

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Overseas port capacity was restricted because of quarantines and worker shortages due to illness. Already operating at its maximum after years of limited investment, United States port capacity became overtaxed and less efficient at moving product to final destinations. Additionally, increased consumer demand for foreign produced goods, such as home office equipment, clothing and furniture, further stressed global supply lines.

According to maritime research and consulting firm Drewry, these issues resulted in freight rates increasing by more than 100% year over year, transportation time increasing by almost 50%, and logistics professionals facing greater difficulty guaranteeing the ability to meet their company’s needs. Companies with logistics professionals who developed and implemented supply chain risk management strategies have likely experienced a limited impact in comparison to those without such processes in place.

It’s Not Over Yet

While the majority of the world is now emerging from the most dramatic parts of the unprecedented global shutdown and hope is on the horizon, significant threats remain that require vigilance and focus. This is best illustrated by the impact of the early 2022 lockdowns implemented in parts of China as part of the country’s zero-COVID strategy. With an export volume of more than trillion, what happens in China quickly ripples around the world and impacts every sector.
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From semi-conductors to resins, active pharmaceutical ingredients to petroleum products, China is a critical node in the supply chain of almost every consumer product. With major production and transportation hubs like Guangzhou and Shanghai implementing sweeping lockdowns, companies are once again feeling the pinch in reduced ability to source product and significantly expanded time lines for delivery.

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What Can Be Done?

Business leaders should consider several best practices to minimize disruption to their organization’s supply chain:

  1. Develop risk assessments on primary and secondary suppliers, determining the impact they could have on the company’s ability to produce product.
  2. Create a detailed mapping of critical suppliers that includes manufacturers and service providers, such as freight forwarders, in order to assess catastrophic risk potential.
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    Have multiple suppliers, preferably in multiple geographic areas, as sources of critical raw materials and components. This reduces reliance on any single supplier or oversized exposure to geographical catastrophe risk. For identified critical areas, create a business continuity plan that outlines the process to shift to another resource in a separate geographic area.
  3. Maintain increased inventory on hand versus reliance on “just-in-time” methods, increasing the ability to quickly match supply to customer demand.
  4. Invest in supply chain intelligence data and telematics to increase visibility on goods in transit, which will help business leaders identify a quick and effective response to catastrophes as they occur.
  5. Manage customer expectations in respect to delivery schedules. The old adage “Patience is a virtue” may never have been more apt.

Looking Ahead

Corporate executives now have a heightened understanding of the supply chain’s importance to a company’s bottom line, leaving logistics professionals uniquely positioned to gain investment in resources to help address emerging logistics and supply risks. By conducting regular risk assessments and developing risk mitigation strategies to address the exposure, business leaders can better position their company to limit the impact of supply chain challenges and create a stronger, more operationally resilient enterprise.

How to Manage Supplier Risk and Performance in an Uncertain Global Economy

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Essentially every company that manufactures goods today depends on other companies to supply the raw or value-added materials that go into their finished products. Most companies recognize that good supplier relationships are more than simply arm’s length transactions between opposing parties. A better way of looking at those relationships is as partnerships—albeit ones that require management and alignment of objectives first and foremost, but ultimately mutually beneficial relationships. The job of procurement is to ensure performance is as promised, risk is low and business objectives are being met through collaboration. When suppliers are treated as partners, they can be a huge asset in times of trouble. Especially today, with some industries moving from a buyer’s market to a seller’s market, many suppliers can have their pick of customers, especially if some are easier to do business with, foster collaboration, listen to new innovative ideas and, most importantly, pay on time.

Well before the pandemic, leading organizations in every industry have that strong supplier relationships and a reliable supply chain are paramount. It is critical to have full visibility across all your suppliers and knowing everything about them matters, because this may be the difference between meeting customer demand and falling short of it. Suppliers are a source of growth, innovation and efficiency, but if they are not managed holistically, they can be a source of risk, poor performance and noncompliance.

Enterprise technologies are available to holistically manage your suppliers throughout their lifecycle and incorporate all the necessary elements around supplier information-gathering, collaboration, and risk and performance management. Platforms with these capabilities can help risk professionals to: improve visibility across the supply chain (including sub-tiers of suppliers); ensure compliance with regulatory requirements (particularly new ESG regulations around carbon emissions, cybersecurity or diversity reporting); assess supplier viability and risk profiles; and evaluate performance and target improvement areas. Implementing such a system requires considerable advance planning and strategic thought. But following a deliberate series of steps can help you structure a solid program:

  1. Figure out what you want to accomplish with your supplier management program. 
  2. Secure executive buy-in from procurement, supply chain and IT leadership.
  3. Structure a plan to gather complete information about all your suppliers.
  4. Segment your suppliers into relevant groups, identifying the standards and processes each group is required to meet, and potentially establishing processes for each segment.
  5. Communicate goals, objectives and policies to your suppliers, whether it is around a code of ethics or more specific goals per segment.
  6. Create a process to continuously gather information about suppliers using surveys or a supplier portal, including topics like information security practices, certificates, financial updates and generic information updates.
  7. Establish an onboarding process for new suppliers and use third-party data sources to assess them against requirements and goals.
  8. Implement a monitoring program to regularly track key aspects of the supplier’s risk and performance profile. 

Your criteria can evolve over time, so regular reassessments of those criteria and related mitigation measures are always appropriate, but having them well-defined at the start will be a tremendous help in establishing clear expectations. As in any relationship, clarity is key to reducing the friction that can result from misunderstandings.

At the same time, however, issues directly affecting the supplier are only part of a larger risk profile. As we have seen during the pandemic, the transportation of supplies from a vendor’s overseas site to your own facility is also fraught with risks. For example, there are shortages of active piers, forcing ships to anchor for days or weeks before they can unload. Additionally, higher levels of theft and shortages of truck drivers, shipping containers, warehouse space, cargo pallets and inspection officials can all compound delivery delays. Being aware of issues within the supply chain, having visibility of your suppliers’ suppliers, and understanding relationships and dependencies are all key to be able to respond adequately.

4 Strategies to More Successfully Manage Remote Teams

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Since the 1990s, we have seen major industries get disrupted by new technologies and innovation. The Internet and tech commoditization, increasing consumer demands, and rising competitive rivalry have all forced businesses to adapt and evolve. Managing disruption has made the overall business landscape much faster, uncertain and, at times, chaotic.

With the pandemic, we have had to adapt again to remote or hybrid work arrangements. While it has many perks, working remotely brings with it a new set of challenges that managers continually need to navigate. First, it is harder to read your team’s energy when you are not in the same office. Second, the number of meetings tends to increase in remote environments, which tends to lead to lower productivity. Third, not being in the same room sometimes reduces the speed of execution, resulting in bottlenecks and miscommunication.

Although working remotely comes with its challenges, here are four strategies that leaders can implement to better manage remote or hybrid teams and disruptive environments:

1. Build a Team for Adaptability

The most important capability to navigate a world of disruption is adaptability. Teams that are built with an emphasis on adaptability are able to pivot and change direction much faster, and are more likely to solve problems that they have not seen before. These teams are also able to navigate the nature of remote work.

Adaptable team members keep an open mind and may be more inclined to find new ways to collaborate with each other, and it may be easier for them to continuously pivot to changing regulations or rules. In other words, being adaptable allows teams to get the job done whether they are working from the office, a client site, or remotely.

2. Get Buy-In

Before starting on your journey, focus on getting your team to buy into your vision and mission. Show your team why the goals are important, and the prize that awaits everyone on the other side of the journey. Being bought-in makes your team more likely to push through uncertainty and change, especially when things get difficult. This can also reduce the need for constant oversight or micromanagement.

A team that is bought-in also feels more accountability with their work and with each other. This ensures teams are focused on getting results while supporting each other along the way. The resulting sense of investment also helps as burnout continues to be on the rise and the boundaries between work and life continue to get blurred while working from home.

3. Provide a Clear Plan and Establish Milestones

When things get chaotic, it helps to clearly define your roadmap and assign key actions to your team with ownership and accountability. When dispersed and facing uncertainty, direction is what a team needs most. Providing your team a clear action plan not only gets you marching on the same path, but may also make you more productive.

Being clear on your deliverables and establishing concrete milestones can help reduce distractions, making it easier to navigate uncertainty and change. This can also reduce virtual meetings to relevant team members working toward a certain milestone, which could boost overall team productivity and save valuable time. 

4. Celebrate the Small Wins

When you are executing and being pulled in multiple directions, it is tough to take a step back from the nitty gritty day-to-day. Most of the work we do in transformational times does not yield results right away—it takes time. Especially when dispersed across different cities or countries, it is hard to see the progress we have made if we do not make a conscious effort to see the forest, not just the trees. Over time, this can contribute to burnout and lower productivity.

Celebrating the small wins helps your team see the progress they are making every day, and puts things into perspective. It also brings the team together, which is a must when working remotely and are not getting the social interaction that we need.