Supply Chain Risks Underinsured in APAC: Zurich Insurance/BCI Survey

January 13, 2017

Six out of 10 organizations in Asia Pacific experienced at least one supply chain disruption in the past year, with one in four incidents costing more than US$1 million, according to a survey conducted by the Business Continuity Institute (BCI) and supported by Zurich Insurance.

Despite these business exposures, the survey found that almost half of respondents (46 percent) in Asia Pacific did not insure their losses.

Companies are at risk of suffering financial losses from supply chains disruption, which can have serious ramifications for their balance sheets, share price and reputation, if they do not have the necessary business continuity arrangements in place, according to the eighth annual Zurich/BCI “Supply Chain Resilience Report 2016.”

Organizations from across the globe said the consequences of supply chain disruption include: loss of productivity (cited by 68 percent of respondents), increased cost of working (53 percent), customer complaints (40 percent), impaired service outcomes (40 percent), damage to brand reputation/image (38 percent) and loss of revenue (37 percent).

The top five causes of supply chain disruption in Asia Pacific were found to be IT/Telecom outages, adverse weather, transport network disruptions, cyber attacks and data breaches, and outsourcer failures, the survey found.

“Effective supply chain risk management and a comprehensive risk assessment can present significant benefits to businesses,” commented Hassan Karim, technical underwriting manager, Zurich Asia Pacific.

Organizations that are able to invest in supply chain risk management “have found that the benefits have far exceeded the investments they have had to make. Without such investment, the cost of disruptions could be devastating,” he emphasized.

“Increased globalization, improved transport and logistics through to technological advancements, have enabled companies to source materials from virtually anywhere in the world,” the report said. “While this provides increased flexibility and cost savings, it can also result in complex supply chains that are highly interconnected, more exposed and difficult to manage.”

Additional survey findings for the APAC region include:

  • Only 30 percent of disruptions occur with an immediate supplier.
  • 30 percent of disruptions occurred at tier 2 or lower in the supply chain, “which makes it extremely difficult to establish exactly where an organization lies within its suppliers’ priorities,” the report noted.
  • 48 percent said top management have made commitments to supply chain resilience but more than half reported a lack of essential top management commitment to supply chain resilience.

“Supply chain risk often crosses many departments within an organization due to the interconnected and far reaching scope of supply chain risk, therefore Executive support is critical to not only secure the necessary resources required to focus on supply chain risk management but also to break down organizational ‘silos’ in order to optimize performance,” Karim explained.

Methodology

The 2016 Business Continuity Institute (BCI) Supply Chain Resilience Report, produced in association with Zurich, gathered responses from 64 countries, of which 13 are in the Asia Pacific region. Respondents were from a wide array of industries, such as financial and Insurance services, professional services, IT & communications, public administration & defense, manufacturing, retail & wholesale, transport & storage, energy & utility services.

The full global “Supply Chain Resilience Report 2016” can be found on the Zurich Insurance website.

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