Wednesday, April 18, 2012


Marsh report warns of supply chain dangers


According to new whitepaper published by Marsh, Supply Chain: How Prepared Is Your Organization?, "Many risk managers not adequately familiar with the tools that are available to help mitigate supply chain risk and improve resiliency, including insurance options."

The 12-page report, a PDF document, is online at
lists the "top 10" most expensive events, in terms of property and business interruption insurance claims. The report notes that "The two costliest events of 2011, the Japan earthquake, tsunami, and nuclear event and flooding in Thailand, illustrate how an event in one part of the world can have a significant effect on supply chains globally."

The Marsh report acknowledges the risk management practitioner's plight when it notes that "many organizations today suffer from a “siloed” approach to supply chain risk management." Product leads, procurement, and logistics make strategic decisions about supply chains while (insurance) risk management practitioners tend to address supply chain exposures by focusing on insurance issues such as contingent business interruption (CBI) and contingent extra expense (CEE), the report contends.

There seems, as Solomon wrote, "nothing new under the sun"; most enterprise risk management, and many business continuity, practitioners are painfully aware that one of the biggest risks to an organization is compartmentalization, a/k/a siloing.

Not only are there the usual "turf" issues, but the lack of comprehension of "the big picture" prevents staff from working together for the common good. (Rather like the U.S. congress and government agencies.)

Good practitioners insist that critical vendors have plans to meet their commitments to the organization in the event something goes "bump in the night."

Good, smart practitioners follow the trail from the vendor's door to the organization's door, and make sure the transportation link is protected.

Really good and really smart practitioners consider all vendors, including lenders, as potential risks.

The very best practitioners also, as in "in addition to the above," consider their organizations role as a supplier, either to a wholesaler or retailer or to the final customer. Can the product or service be delivered. The "supply chain" usually doe not stop when the practitioner's organization receives product or service from its vendors.

Insurance - Marsh's business - is important, and this practitioner is a strong believer in bringing in insurance advisors along with other Subject matter Experts (police, fire, etc.) to make certain the organization is as protected as it can be; that threats or avoided or mitigated.

Although I found nothing new in the Marsh report, its presentation of selected statistics can be valuable if Very Senior Management needs to be convinced that compartmentalization is a very real threat to an organization's future.

If I wrote it, you may quote it.

Longer articles at

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