NU Online News Service, May 18, 2:45 p.m.EDT

Organizations facing a growing number of global crises are waryof breaks in their supply chain, stockpiling critical items andcommodities, and sometimes resorting to “panic buying,” accordingto a risk-management expert.

“They’re looking further upstream, past first-tier suppliers,”says Gary S. Lynch, managing director, Marsh Risk Consulting, in anonline webinar.

He notes that organizations are looking past their first-tiersuppliers and want to know about the recovery and sustainability ofthe supply base upstream. This can consist of contractors,contracted manufacturers or other suppliers.

Risk managers also are reviewing their insurance coverages “tosee if this is in the scope of their coverage and their exposure,”he says, adding that they are “trying to get a handle on how tomanage volatility beyond what they are used to managing.”

Risk managers, Lynch adds, are “looking to enhance theirsupply-chain risk-management programs to go beyond the normal typesof disruptions and deal with extended outages in a much moreaggressive way.”

Lynch says in a report that organizations in today’s globalmarketplace are exposed to increasingly complex and interrelatedrisks.

Lynch lists a few: globalization; pervasive connectivity; anincrease in the severity of natural catastrophes; a credit,liquidity and then solvency crisis; a shortage of natural resourcesand commodities; and the expansion of the have/have not chasm.

He writes that in the past 12 months alone, in addition to theearthquake/tsunami/ nuclear incident in Japan, there has been adevastating earthquake in New Zealand; political and socialrevolution in the Middle East; massive flooding in Australia; avolcanic eruption in Iceland; pirate hijackings of supertankers offthe coast of Africa; and the largest oil spill in the history ofthe petroleum industry off the Gulf of Mexico.

Because of the growing number and expanding nature of risks thatcan impact supply chains, he writes that risk managers should takea best practices approach.

They need to:

â–ª Gain visibility upstream and downstream.

â–ª Simplify complexity by looking at resources through a value(market served or product families) lens.

â–ª Establish accountability for risk activities by designatingownership not by asset (these are the custodians), but by profitand loss leader, business manager, and product family owner.

â–ª Understand their suppliers’ supply-chain and risk-managementplans; create risk-management plans if needed, including incentivesand penalties.

â–ª Create a business case for investment by measuring impactagainst risk mitigation and financing options. Establish businessintelligence and leverage analytics and decision modeling tosupport the business case.

â–ª Provide holistic insurability beyond physical-damagecoverage. Supply-chain interruptions extend to the non-physicalworld, including labor strikes, pandemics, regulatory change, civilorder and financial failure. The scope of coverage should alsocover non-physical damage.

â–ª Maintain relevance by ensuring vulnerabilities are relevantto the supply chains of greatest value. Avoid strategies that focusonly on threats and make that only make use of qualitativemetrics.

“With discipline, analytics, decision modeling,” and theinvolvement of a broad cross-section of internal and externalbusiness, technology and operation leaders, “organizations can gaincontrol of their supply chains and become more resilient in theface of the next disruption,” Lynch says.