Businesses must put more effort into pre-planning for business interruption going into 2013, says a new Zurich report naming supply-chain disruption as the top risk “blind spot” of the year.
The report surveyed 600 of Zurich’s global risk engineers who work to reduce insurance-related and other corporate losses.
“As the supply chain gets more global, it starts looking like more of a spiderweb than a chain,” says Linda Conrad, director of strategic business risk management for Zurich in North America. “Companies often underestimate their risk, but historically, 40 percent of companies experiencing extended interruption completely go out of business.”
Conrad suggests organizations map out their supply chain, including first-and second-tier contracted suppliers, and quantify each link in the chain by financial stability and even geopolitical issues in the area where it is located.
“Value is about more than being able to name the lowest or best price for a product or service,” she says. “It is also how, in the long run, it is going to help the organization prevent larger losses.”
A November survey from Zurich and the Business Continuity Institute found that the leading causes of supply-chain disruption are unplanned IT or telecom outages, with 52 percent of organizations surveyed experiencing some or high disruption as a result.
Such disruption is also becoming more consequential than it was in 2011, with 1 in 5 companies having registered a single-incident loss of more than $161 million in 2012.
Effectively managing supply-chain continuity is critical not just because of the immediate costs of disruption but also the longer-term consequences to stakeholder confidence and reputational damage, says Zurich, and it should be thought of as part of everyday operations—not as an emergency escape route.