Managing supply chain risks
2022's Airmic ERM (Enterprise Risk Management) Forum held in London, provided risk professionals a networking platform to explore trends that are reshaping the enterprise risk management landscape, such as the impact of geopolitical tensions on supply chains as well as the increasing threat of cyber attacks as our world becomes more interconnected.
Supply chains are adapting and reshaping in response to the fast changing and volatile world we operate in.
One of the panel sessions ‘Supply Chains: what now?' welcomed an expert panel to the stage to discuss how supply chains have become increasingly volatile.
The session explored what risk professionals can do to build greater supply chain resilience for their organizations.
Part of the panel was Adriano Lanzilotto, vice president client learning & development at FM Global.
Insider Engage caught up with Lanzilotto during the networking break to further discuss the risks facing organizations. He explained as companies strive to become more sustainable it could result in them potentially facing new risks.
“As a property insurer we look at climate change as a potential risk on two levels – loss from natural hazards – not just flood and wind but secondary perils like hail, wildfire – these are increasing," said Lanzilotto.
“As companies try to adapt to climate change and make their journey towards a cleaner economy – they are making some changes that could introduce new risks, for example, the use of solar panels on green roofs, mass timber construction – all this generates potentially risks that are underestimated.”
Collaboration is a key part of risk assessment and cannot be done solely by the risk manager, according to Lanzilotto.
“Risk managers need to work ESG managers to make sure that changes to a business are managed properly from the risk perspective," he said.
"If you think about the supply chain, when you create a relationship between an organization and their suppliers the assessment of the risk cannot be done by the risk manager in isolation – you require marketing, procurement, legal, IT and other departments to ensure the risk is holistically assessed.”
We invest a lot in research and loss prevention – we have a research campus in the US that uses technology to investigate how losses happen.
For insurers investment in technology is crucial in risk mitigation, enabling them to support clients effectively.
“We invest a lot in research and loss prevention – we have a research campus in the US that uses technology to investigate how losses happen. We set fire to storage arrangements, pieces of construction to study how this develops,” explained Lanzilotto.
“Fire, wind and flood protection technology are developing. Recently we approved a solar panel that can sustain the impact of hail, which is a way we can help our clients with the transition to materials that are less combustible and safer to use.”
Furthermore, cyber attacks are resulting in physical damage and insurers need to help clients prepare for this possibility.
“Cyber is a big driver of loss and a threat as the world becomes more interconnected. From a property side we look at the impact of a cyber attack on the physical assets of a company.
“The cyber market generally looks at liability and security of data. There is also an element of physical damage – so we need to think of how to help our clients prepare if a cyber event becomes a physical fire or there is breakdown of machinery.
“There is a term that has been invented recently which is ‘kilware’ – malware designed to cause damage to big utilities for example and that loss can put an organization out of business and cause reputational damage. Hackers do this to hit large organizations.”
Airmic also released a report on supply chain challenges, which aims to assist directors in navigating this increasingly complex landscape of supply chain challenges.
According to the report, there are indications that insurers are willing to take a more holistic and bespoke cross-class approach (encompassing property and business interruption, liability, marine cargo and cyber risk) to the supply chain challenges faced by large organizations.
Julia Graham, CEO of Airmic said: “Supply chains are adapting and reshaping in response to the fast changing and volatile world we operate in.
"Boards are considering the risks associated with their supply chains and closely examining the cost benefits of current practice and changes which might be required to meet the purpose and strategic objectives of the organizations they govern.”