Frankfurt/Munich, Germany—June 24, 2014—The after-effects of serious catastrophes, such as Fukushima in Japan or the floods in Thailand in 2011, can still be felt by many companies to this day. The considerable number of losses incurred by suppliers and customers at the time meant that many insurers curtailed their limits significantly in this regard or canceled them altogether. In many cases, companies are now only covered where maximum risk transparency is provided.
Industrial insurance broker Marsh and riskmethods, technological provider of risk analysis of global supply chains, are now offering companies in all sectors an option for obtaining qualified risk information on their supplier networks by means of the cloud-based Supply Risk Network solution. This allows for an optimized placement process, better prices and enhanced capacity. The Supply Risk Network was developed by riskmethods and is available to Marsh—and as such, its customers—as an exclusive collaboration partner for use by its risk advisors and insurance brokers.
The Supply Risk Network collects and searches for global risk information via a large number of verified data sources, as well as via riskmethods Risk Research, which monitors more than 300,000 online sources. Risk information generated for suppliers, and their sites and countries is available around the clock in near real time. This integrated approach currently captures approximately 80 risk indicators: from supply interruption due to natural disasters, pandemics, political unrest right up to sabotage, and problems related to finances or quality on the part of suppliers.
Gaining time, both for preparing and responding to interruptions in supplier networks, can be of significant advantage in terms of the outcome, especially when it comes to setting up emergency operations by way of organizing possible alternative suppliers, for example, or by redirecting material flows.
"Greater transparency of the supplier networks can improve underwriting coverage terms and conditions in terms of risk placement in the insurance market," said Dr. Georg Bräuchle, managing director at Marsh GmbH, who is responsible for placement. "In many cases, this is the only option for hedging risks, as insurance companies can no longer simply refuse assumption of risks on the basis of missing risk transparency and unpredictable accumulation risks."
Irrespective of whether insurance cover is available to the required extent or at an appropriate price, improved transparency means that companies are more flexible when it comes to decision-making. "If you are more aware of your risk, you are probably more likely to bear it yourself because it is lower than previously assumed. Or, in the reverse case, this may result in decisions concerning placement in the capital market in the form of alternative risk transfer, or in reengineering of a product or new procurement strategies," added Bräuchle.
In the event of failure to deliver by a supplier, for example, due to a natural catastrophe or where a delivery is kept back at a transshipment point like a port or airport as a result of a strike, the customer receives notification via his or her mobile phone, computer or tablet.
"The Supply Risk Network monitors and analyzes not only direct suppliers, but also their subcontractors in order to map risk dependencies across the entire supply chain," said Rolf Zimmer, managing director at riskmethods. "The early-warning system informs companies of the risks, and also of the affected suppliers and regions. In this way, interruptions that occurred can be immediately localized and identified, and suitable measures implemented at an early stage."
Use of the solution also helps recognize and evaluate risks better in advance. "The geo-coordinates that can be derived from the addresses are a good indicator for a large number of potential risks, such as political or economic conditions, and for exposure to natural disasters," explained Markus Groth, head of Marsh Risk Consulting and expert in supply network risks.
"Together with our customers, we develop scenarios for a breakdown in business processes and resources that are essential for manufacturing strategically important products. In this regard, we solve problems like: What is the loss potential associated with uncertainty in terms of a certain supplier? What risk control options are available? What recovery costs would be incurred in the case of loss of the supplier?"
