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” that work to reduce insurance-related and other corporate losses.
The results back up a Zurich and Business Continuity Institute (BCI) survey noting that 73 percent of organizations recorded at least one disruption in 2011. Half of respondents reported two.
“As the supply chain gets more global, it starts looking like more of a spiderweb than a chain,” says Linda Conrad, director of strategic risk for Zurich Global Corporate in North America Business.
“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 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,” says Conrad. “It is also how, in the long-run, it is going to help the organization prevent larger losses.”
The BCI survey 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.
Disruption is also becoming more consequential than it was in 2011, with one in five companies having registered a single-incident loss of more than $161 million.
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.
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