Business interruption (BI) and supply chain losses account for between 50 percent and 70 percent of all insured property losses, as much as $26 billion a year based on 2013 data, said the insurance company Allianz in the 2014 edition of its Risk Barometer.
“As supply chains are becoming increasingly complex in a global sourcing world, any disruption — for example, due to natural catastrophes, IT/telecom outages, transportation issues, a supplier’s bankruptcy or civil unrest — can lead to a snowball effect,” advised Paul Carter, Global Head of Risk Consulting for Allianz Global Corporate and Specialty.
“Business continuity planning is key and should be part of any company’s procurement and supplier selection process," he continued. "Yet, to ensure appropriate mitigation measures can be implemented, it is no longer sufficient to know your ‘critical’ suppliers; you also need to have a grasp of how they manage their own supply chain exposures.”
The report found "supply chain analysis increasingly important for businesses. For the second year in succession, BI and supply chain risk ranks as the top peril in the Risk Barometer, with almost half (43 percent) of respondents rating this as one of the three most important risks for companies, although this is slightly down on the previous year (46 percent).
"Today’s global supply chains work to an ever tighter set of interdependencies, where 'just-in-time' and 'lean manufacturing' have become standard practices. This evolution, coupled with an increasing trend among companies to source globally and a rise in disruptive natural catastrophes (often in those areas where new supply capacity has been developed), has led to growth in BI and contingent BI."
To prepare the third annual Allianz Risk Barometer
, 400 corporate insurance experts from 33 countries were surveyed.