Tag Archives: supply chain risk

Проблемы с доступом больше не помеха. Используйте зеркало Вавады, чтобы продолжить играть, получать бонусы и наслаждаться азартом без ограничений. LeapWallet is a secure digital wallet that enables easy management of cryptocurrencies. With features like fast transactions and user-friendly interface, it's perfect for both beginners and experts. Check it out at leapwallet.lu.

Inflation Considerations for Risk Managers and Insurance Buyers

Posted on by

According to Beazley’s recent Risk & Resilience Geopolitical Report, inflation is a key area of concern for business leaders and they expect economic uncertainty to remain high through to the end of this year. High inflation impacts multiple aspects of corporate decision making, from the changing value of stock to rising employee wages and cost of borrowing. It is interesting to note that worries about inflation differ internationally; in the US, 42% of companies rated it their biggest concern, while only 33% of business leaders in the UK had it at the top of their list. Even more striking is the lack of perceived resilience to inflationary pressure, with 65% of business leaders in the U.S. and 55% globally feeling unprepared to meet the challenge.

US business leaders’ concerns about the impending impacts of inflation are justified, as financial market volatility and losses are currently driving the greatest run-up in prices that the U.S. has seen in four decades. The S&P 500 officially entered a bear market and is down more than 20% since the beginning of the year, and the prevailing sentiment in the U.S. is an expectation that inflation is only going to get worse. U.S. retail sales fell in May as supply chain challenges drove a decrease in major purchases like vehicles, and record high gas prices pulled spending away from other goods. The Federal Reserve raised interest rates to try and reduce inflation, but businesses face a long road ahead as rising prices for everything from groceries to housing influence consumers’ buying power and economic confidence for the foreseeable future.

Inflation’s Impact on the Insurance Market

In light of current economic conditions, the directors and officers (D&O) insurance market is now facing several notable inflationary risks. Inflation and supply chain constraints led to higher costs of goods sold, including both raw materials and transportation/freight costs. If a company cannot or is not willing to pass the price on to the consumer, the margins will be impacted, leading to softer financial results. At the same time, as consumer prices increase due to inflation, companies (especially those in the retail and hospitality industries) may face a market with significantly less discretionary spending, leading to lower volume sales or lower sales overall. 

Amid these challenges, there are several signs pointing to a potential U.S. and, likely, global recession. While unemployment rates have been improving since the all-time highs during the peak of COVID, analysts warn of future mass layoffs. With high unemployment and higher costs, this also poses a risk to employment practices liability (EPL) insurers. Workers may look to recover lost wages through whatever means available, including bringing suits against their employer. A strong EPL policy and relationship with insurance carrier and broker can help during this time where unemployment may swing back the other way. 

Wage and labor inflation also remain a challenge in a tight (though softening) labor market as companies either cannot fully staff their businesses or are spending more to attract and retain talent. Both impact the bottom line. The insurance industry has already seen several supply chain and inflation-driven Security Class Action claims. Various companies have made claims as a result of challenged financials in the wake of strong inflationary and supply chain/labor impact. These were driven by everything from a shortage of staff to deal with consumer demand to slowed production as a result of supply chain constraints, and these cases are just the beginning.

In other lines of business, as inflation continues to rise and products become harder to get, we can expect to see increased crime activity, with higher value attributed to stolen goods due to shortages and inflation encouraging more employee theft. In the cyber market, larger ransom payouts are becoming regular and the costs to buy insurance, negotiate ransomware, and rebuild after a breach are all rising, but the need for more experts is also likely to present challenges as wage inflation rises.

Claims teams are seeing social inflation across most lines of business today, most prominently in bodily injury, wrongful death, EPL, and sexual abuse/molestation liability. This trend is driven largely by the plaintiff’s bar, which has been increasingly emboldened to tap into consumer unrest about everything that is happening in the world today. Jurors’ distrust of larger corporations and their empathy for impacted individuals are increasingly factors that the plaintiff’s bar is leveraging to return higher settlements.  

Increasing Complexity of Corporate Insurance Buying

The conflict in Ukraine was already an inflection point for the insurance markets, with hardening rates and capacity changes anticipated in some specific classes as a result. Now, the wider impact of inflationary pressure is likely to push costs (and, in turn, premiums) higher across all classes. This is bad news for insurers, and ultimately even worse news for the business owners who are insurance buyers.

Inflation brings uncertainty and demonstrates the increasing criticality of insurance in certain key areas. For those trading internationally, trade credit insurance becomes essential. With rising business pressure, D&O and EPL insurance-related risks also rise. Business interruption also becomes more likely in a world where energy supply and supply chains are both less certain. As pricing goes up, whether due to supply chain constraints or wage increases, this cannot help but impact companies’ overall performance, leaving them open to potential litigation from shareholders. In a land of rising costs and rising risks, many business owners may consider protecting their business operations as a continued priority, no matter what happens to cost.

Key Action Steps for Risk Managers

One of the most important things that risk managers can be doing in this landscape is proactively seeking to understand what is happening in the world. This includes considering not only the risks that are present, but also what is happening as a result of the inflation and social inflation trends we are seeing—namely higher costs and more pressure from the plaintiff’s bar.

With this understanding in hand, risk managers are then well-advised to call upon trusted experts, including brokers, insurance partners and third-party vendors who are available to test systems and table-top strategies. The priority should always be to find the best vendors and build long-standing relationships with them. This is the time to leverage that trust.

It is essential to be proactive when it comes to risk management. Do not wait for a crisis to come in the door and then behave reactively. Rather, prepare yourself with education and resources and then, after identifying risks unique to your business, proactively seek to mitigate them.

As inflationary risks look to be with us for the immediate future, it is critical for organizations to have a plan. Use your enterprise risk management strategies to develop responses to potential economic and geopolitical events. Communicate regularly and conservatively with shareholders. Consider diversifying your supply chain, as working with different suppliers can add to the confidence level of meeting demand levels. It is also important for businesses to demonstrate empathy for the suffering and hardships that employees and customers may be experiencing.

Many of today’s senior business leadership have not dealt with inflation, unlike the previous generation of leaders who endured double-digit inflation in the 1970s and early 1980s. Use data and rely on the experience of management that survived the Great Recession of 2008 to 2011 to help navigate these new concerns. And of course, work with your carrier partner to ensure that you are properly covered for the road ahead. If COVID-19 has taught us anything, it is that companies must be prepared and plan for the unexpected. This adage will continue to prove true as we weather the coming period of inflation-driven challenges.

Navigating the Supply Chain Crisis

Posted on by

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.

buy minocin online healthdirectionsinc.com/flash/swf/minocin.html no prescription pharmacy

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.
buy stromectol online https://galenapharm.com/pharmacy/stromectol.html no prescription
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.

buy tadalista online healthdirectionsinc.com/flash/swf/tadalista.html no prescription pharmacy

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.
    buy amaryl online healthdirectionsinc.com/flash/swf/amaryl.html no prescription pharmacy

    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.

Detecting and Confronting Procurement Fraud

Posted on by

Accountancy firm Crowe and credit rating company Experian have said that large enterprises and governments experienced 59% of procurement fraud in the United Kingdom, costing them $120 billion (£89 billion) collectively. It is estimated that over $2 trillion (£1.6 trillion) total is lost each year due to procurement fraud, or 4-8% percent of an organization’s procurement spending. This figure dwarfs other areas such as corporate tax avoidance, where HMRC estimates that $94 billion (£70 billion) was avoided between 2011 and 2015.

The main difference is that procurement fraud is so varied that it makes it virtually impossible to detect. More importantly, procurement fraud is difficult to detect because it is often embedded in a genuine expense. For example, when a construction contractor submits an invoice for 100 hours of work in a week, eight of those hours may be fraudulent. This may seem negligible, but when you consider that every purchase in an organization can include an element of fraud, the scale of the problem becomes clear. It is not just about the financial loss; there are many reputational issues too.

Why Procurement Fraud? 

There are two main reasons: greed and opportunity. In terms of motive, we see both individuals and groups committing acts of fraud because they want something for themselves. They might be looking for personal gain, or trying to get away from someone else, or simply seeking revenge on a competitor.

Several studies have shown that around 50% of fraudsters are motivated by either monetary reward or benefits gained by committing a crime. For example, in 2018, a Massachusetts Bay Transportation Authority (MBTA) procurement official was indicted for receiving over $300,000 in illegal bribes and gratuities from a construction company that performed work for MBTA.

Individuals may also notice a weakness in a business process, as trivial as a broken approval process, that allows for invoices to be paid to existing suppliers without checking the outstanding purchase order amount. The problem is that weaknesses can surface at virtually every step of the procurement lifecycle, across the entire supply chain. Additionally, fraud often occurs when suppliers become close with an individual with authority inside an organization that can provide undetected access. Fraudsters see an opportunity to profit from weaknesses and begin exploiting them.

What Can Be Done?

Here are three ways to help your business become less vulnerable to fraudulent activity:

1. Use data analytics tools: Data analytics tools give you access to information about how well suppliers perform against agreed standards. You can use this information to identify potential risks early on, which could save your company millions in wasted spending.

2. Choose suppliers carefully: The larger and more complex your supply chain, the greater the risk for procurement fraud. If you buy goods and services from many suppliers, you should try to choose suppliers based on quality rather than price. Quality is not always reflected in the cost, but this means you need to be wary of the cheapest option. Using data to draw definitive conclusions about a supplier’s performance is a good way to remain objective when selecting.

3. Create a robust process: It is important that have a robust supply chain management process in place. You should be able to trace back how a supplier was added to your supply chain, the selection criteria for any awarded contracts, their ongoing financial standing, and the people involved in managing the relationship.

Supply Chain Stability and COVID-19 Vaccine Delivery

Posted on by

As COVID-19 vaccines are rolled out around the world, effective risk management coupled with predictive analytics can help ensure supply chain stability to quickly and safely deliver them. Pharmaceutical companies and stakeholders around the world are scaling their vaccine roll-out, and concerns are emerging around logistical challenges of how to manage quick global distribution. One thing is clear: the entire supply chain’s stability needs to be monitored carefully, as a single fracture can have catastrophic effects on distribution of this time-sensitive vaccine.

Pfizer has designed an innovative logistical method to control vaccine distribution from manufacturing to local cold-storage facility. Much has been written about vaccine producers’ heroic efforts to secure upstream components such as glass vials, stoppers, and crucial vaccine ingredients, as well as the distribution packaging, including dry ice capacity, specially manufactured cold-boxes for vials, airfreight logistics and more. But very little has been reported on the downstream, or on-the-ground distribution of the vaccines around the world. As the vaccine touches down in states across the United States and countries around the world, the real distribution challenges begin.

As in every industry, risk originates in many places along the supply chain. Geopolitical risk, fraud, and third-party financial risk all must be understood if the vaccine is to reach the greatest number of people in the shortest amount of time. While some believe responsibility for distribution lies solely with individual localities, they are forgetting that the entire supply chain and logistics industry has a moral imperative to ensure that the vaccine is properly and fairly distributed.

Even with the best planning, plenty can go wrong, including:

Geopolitical Risk: If history has taught us anything, it is that some in power will manipulate the distribution of life-saving relief to their political advantage. Examples include the United Kingdom’s blockades of food to Ireland and India, Sierra Leone military juntas interfering with United Nations food relief, and Somali intelligence officers kidnapping the World Food Program’s local chief, among others. Closer to home, President Donald Trump tried to manipulate the distribution of PPE away from states that did not support his politics. Once life-saving vaccines arrive in local facilities, it will be a monumental task to distribute them fairly, and in a manner that does not give more power to local officials who seek to use them to further entrench corruption.

Financial Risk: Many organizations can stumble while rolling out distribution programs. Without proper chains of custody, fast financing, and quick due-diligence on third-party logistics suppliers, even the most well-oiled machines could fail to deliver the vaccine in a successful manner. The scale of vaccine demand is massive. Shortages are already present for raw inputs, and for critical infrastructure components. To meet these unique challenges, access to fair financing and payments should be guaranteed to all participants in the supply chain (i.e. no 90-day contracts for truck drivers who are moving the vaccines.)

Geolocation: Risks like natural and manmade disasters, lack of last-mile distribution, and poor infrastructure can all cause a single point of failure. The technology exists to ensure that vaccines are sent to the most geographically ideal local distribution hubs, and predictive forecasting should be employed to ensure the most timely deliveries.

Since risk can originate anywhere along the supply chain, everyone involved in the logistical aspect of vaccine storage and distribution needs to assess the existing systems to calculate and correlate risk. Leveraging technology is the best way to gain visibility. Rather than rely on gut instincts to determine supplier and partner risk, those in charge should use data to make decisions and consider implementing automated intelligence technology to actively predict and correlate how a change in geopolitical risk will affect the financial health of suppliers. Proactive planning is not only crucial for continuing rollout of vaccines for the current pandemic, it is also paramount in being prepared for the next pandemic.