Mitigating risk amid disrupted supply chains:
A guide for businesses
In November 2023, Chubb published an article in Credit Insurance News entitled, “Global Supply Chains: The current outlook for U.K. businesses”. In it, we explored the current state of supply chains and how they are impacting businesses. In this follow-up article, we look at how businesses can get ahead in a volatile global landscape by building resilience in their supply chains through robust risk mitigation.
Understanding the weaknesses
The first step in risk mitigation is comprehensive mapping out of your operations. Pinpoint every link in your supply chain, from raw materials to final delivery. Identify your most critical suppliers and assess their own strengths and vulnerabilities. A chain is only as strong as its weakest link, even one that is buried deep within your multi-tier network. So don't be afraid to investigate your suppliers' suppliers.
Once vulnerabilities are identified, it's time to build resilience. Invest in diversifying your supplier base to move away from overreliance on single sources. For example, consider reshoring or nearshoring critical production for greater control and shorter lead times. Warehousing can be a buffer against unforeseen delays, providing vital breathing room when disruptions strike. Remember, cost optimisation shouldn't trump business continuity.
Planning for the unforeseen
Developing a robust Business Continuity Plan (BCP) is crucial. This playbook should detail response protocols for various scenarios, from natural disasters to geopolitical turmoil. Regularly test and revise your BCP to ensure its effectiveness. Don't be afraid to test possible scenarios and identify potential failure points before they become reality.
Collaboration is key
Open communication and collaboration with suppliers are essential. Synchronise your BCPs, ensuring your contingency plans align and that information flows freely. Conduct supplier audits to assess their own risk management measures and work together to plug any gaps. Transparency is a vital tool for building a resilient supply chain ecosystem.
Beyond profits: Sustainability and regulation
Supply chain risk extends beyond traditional concerns. Modern legislation like the U.K's Modern Slavery Act demands transparency and accountability for ethical sourcing practices throughout your supply chain. Identifying second- and third-tier suppliers is becoming ever more crucial in a landscape where regulation is increasing globally that makes companies responsible for the actions lower down their supply chains. When considering emissions, it should be noted that Scope 3 emissions can often originate deep within your network.
A Partner in risk management
Navigating this complex landscape alone can be daunting. That's where organisations like Chubb come in. With comprehensive Transportation Risk Management (TRM) expertise, we can support your risk assessment and mitigation efforts. We work alongside you to find alternative routes, secure alternative suppliers, and manage insurance coverage – all to keep your supply chain flowing smoothly.
Supply chain disruptions are an unfortunate reality of global economic and geopolitical turbulence. But by embracing transparency, collaboration, and proactive risk management, businesses can weather the storms and emerge stronger. Agility, adaptability, and out-of-the-box thinking are your allies. So, ask yourself: "What will I do if my weakest link breaks?" Prepare for the unexpected, and your supply chain will be ready to face whatever tomorrow brings.
To learn more about how to build a resilient risk management framework, read our report “The spectre of disruption: supply chain risk and what you need to know”.