Supply chain risks put to the test
28.11.2017 - In the era of just-in-time production and delivery, robust supply chains are more important than ever for companies. But disruptions, such as natural disasters or geopolitical crises, are happening at an increasing rate worldwide. With the right methods, risk managers can assess the risks to their supply chains and ensure the success of their company.
Raw materials from China, technology from Europe or production facilities in the USA – globalisation is part and parcel of day-to-day business for manufacturing companies. And even retailers and logistics service providers are global entities with worldwide networks these days. But the more links there are in the operational value-adding chain, the more difficult it is to implement systematic risk management.
Dr Alexander Skorna, a specialist in the analysis of supply chain risks at Funk, explains: ‘Weaknesses in the global supply chain usually only become apparent when a claim arises or a crisis happens. For example, the failure of a specialised internal or external supplier to deliver can lead directly to large-scale interruptions to operations, without this type of risk being known to the company beforehand.’
Only efficient risk identification allows for targeted risk prevention. Funk helps companies in the detailed analysis of their supply chain risks with a variety of different services:
Supply chain quick check
The Funk Foundation sponsored the development of a free quick check online assessment from Jacobs University Bremen. Risk managers can use the tool to evaluate their supply chain risks quickly and easily by analysing both company risks and industry-related and environmental risks to their supply chains through the application. They also receive recommendations for risk-mitigating measures.
The supply chain quick check is specially designed for industrial companies, but logistics service providers can also glean important information from the tool for their customer services.
Business interruption analysis
The business interruption analysis shows internal and external dependencies in the supply chain resulting from certain individual production sites, suppliers or customers. Funk harnesses the Evidence software tool to verify key insurance-relevant data such as the insurance cover, limit of indemnity, sub-limits and indemnity period and recommends what needs to be adapted. Even events that are not related to property damage can be included in the analysis and protected against by way of special insurance solutions.
Cyber risk analysis
Production and value-adding processes heavily depend on company-specific IT solutions. Often suppliers and customers are also integrated in the IT landscape. Funk examines the business impacts of cyber risks as an important basis for tailored cyber insurance covers. In addition to the advantages of having an IT-focussed emergency plan, identifying and assessing the risks during the cyber risk analysis also serves as an aid for achieving certification under ISO 27001.
Enterprise risk stress test
The effects of specific risks or scenarios, such as the elimination of a production site or a key selling market, on a company's balance sheet (PnL) are evaluated in this analysis. To do this, Funk harnesses claim-oriented Monte Carlo simulation models in Funk's own risk management software, RIMIKS, which companies can also use to control risks. Based on the stress test result, companies can decide whether a specific transfer of risk is sensible or should be reflected in existing contracts.
Business continuity management
In addition to emergency and crisis management, integrated business continuity management is also becoming more important for companies, in order to minimise the negative impact of a crisis event as far as possible. Funk helps companies implement business continuity management so that their delivery capabilities for profit-relevant products can be safeguarded as much as possible and the firm’s reputation can be protected.