News detail
From the archive: trade disruption
26/08/2008
Russia-Georgia conflict raises fears of supply chain fragilityOleg Vukmanovic, August 13
FIGHTING in Georgia has undermined trade deals and drawn attention to the fragility of global supply chains, with trading partners of Georgian companies potentially set to lose out, broker Miller has warned.
Military bombing of the road infrastructure, threats to blockade port cities and reduced marine traffic has virtually erased trade in some quarters and may trigger supply-chain insurance policies, though few firms are thought to own such insurance.
Trade disruption has left trading partners particularly vulnerable since delayed shipments usually do not warrant insurance payouts, whereas cargo losses do. Rupert Sawyer, assistant director of special risks at Miller, said: "Miller has not seen anything yet but businesses in Georgia and its trading partners will be affected from the point of view of pure financial consequences. A lot of businesses will be affected. But whether any of them own supply-chain policies [which protect against late delivery] is probably unlikely."
Improved efficiency masks vulnerability to key danger areasRachael Gormley, June 20
THE global supply chain is more complex and efficient than ever before but it is still vulnerable to certain key risks that need to be managed effectively, delegates at the conference heard at a presentation by
Historically, supply-chain considerations were fairly simple and often focused on issues such as how to move goods from A to B or how to optimise inventory levels.
However, as supply chains have evolved to be more intricate and effective, so have the risks they engender. "A shift to global sourcing, plus the introduction of ‘just-in-time’ production processes, has resulted in rapid manufacturing, low inventories and a reliance on modern transportation and logistics," said McKay.
"Coupled with world demand for commodities and finished goods, this has resulted in a taut supply chain that is extremely sensitive to three major issues."
These are:
* Capacity constraints at major transport hubs and a projected shortage of container ships
* Strategic supplier failure
* Business interruption of a key supplier
Energy supply concerns increase, warns LeveneInforma Insurance News 24, September 7, 2007
GLOBAL events are of increasing importance to
Speaking at
He noted that about a quarter of large companies thought an attack on energy supply could be a significant risk for business. "In this increasingly interconnected economy, it is clearly no longer enough to manage the risks your organisation faces - you must understand the risk of those you do business with too".
The two other emerging areas of terrorism risk were technology attacks and the rise of home-grown terrorism. Lord Levene said the computer attacks on the Estonian financial system had immobilised the banks for at least three weeks. Home-grown terrorism, was seen as "the greatest security threat" the UK currently faces, and companies are as much a target as governments.
Firms still failing to manage risk Rachael Gormley, June 24
LESS than one-third of risk managers feel that risk management is always considered at board level in their companies, new research has revealed.
According to a survey by broker Marsh conducted among risk managers at the recent annual conference of the Association of Insurance & Risk Managers (Airmic) in Edinburgh, 22% of those asked said they felt board-level consideration of risk management "never or rarely happened at all". And when risk management does hit directors’ agendas, 35% of those asked said the impact on cost of risk was used to measure the value of risk management, while 25% measured it in terms of reduced incidents or losses.
Only 5% cited reductions in insurance premium, while 14% said they did not measure value.
"It is clear from our research that UK risk managers feel that risk management still has some way to go before achieving full recognition in the boardroom," said Eddie McLaughlin, leader of Marsh’s risk advisory group for Europe, the Middle East and Africa.
"Progress has been made by linking risk-management quality to capital allocation and over time to a firm’s credit rating but as an industry we are not there yet."
