AIR Expands Solutions to Include Supply Chain Risk Quantification

Risk modeler AIR Worldwide says it has worked supply-chain-risk quantification into its set of Catastrophe Risk Engineering solutions.

“The catastrophe-risk-to-supply-chain networks came into focus following the volcanic eruption in Iceland in 2010. Just one year later, awareness of this risk was heightened further by the Tohoku earthquake and tsunami in Japan, as well as the major flooding in Thailand,” says Akshay Gupta, director ofAIR’s Catastrophe Risk Engineering (CRE) practice, in a statement. “While the catastrophe-risk-to-supply-chain network is quite complex, it can be effectively quantified. Once completed, the work involved to quantify this risk can also help expand risk assessment to other non-catastrophe perils.”

AIR says its new product offering, announced today at the 50th annual Risk and Insurance Management Society (RIMS) conference in Philadelphia, will allow risk managers to more accurately assess and reduce risk to supply chains—from physical damage and contingent business interruption—due to perils such as hurricanes, earthquakes, floods, tornadoes, and tsunamis. Network vulnerabilities along the supply chain can be seen clearer, says AIR, and corporations can consider different mitigation measures to improve supply chain resiliency following a catastrophe.   

Supply chains have multiple, linked operational points, or “nodes.” While there has been work to quantify physical damage along the supply route, there has been no approach to account for the impact of a disruption to simultaneous multiple points, or a partial shutdown along the chain. The model also works in the likelihood or frequency of shutdown to points along the supply chain, adds Gupta.

“AIR’s CRE solutions combine a detailed network analysis with catastrophe risk models,” says Gupta. “As a result, partial damage and downtime states for all nodes can be simultaneously and explicitly considered. CRE solutions also account for the level of disruption at each location from multiple perils. By quantifying the impact of these disruptions on the overall supply chain network, CRE solutions provide a much more realistic and reliable view of downtime and loss.”

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