Your Supply Chain Risk Mitigation Insurance Is Now At Risk

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If you weren't paying attention, something really interesting was published over on Procurement Leaders.  An unprecedented amount of claims on business interruption policies have caused Munich Re to demand visibility into their customer's supply chains before paying claims.

From the post:

"It is necessary for us to be able to quantify our risks exactly within 18 months, at the most," Munich Re board member Thorsten Jeworrek said in an interview.

If you are in the supply chain industry and have responsibility for mitigating financial risk through insurance instruments you may want to take this as a shot across the bow. Seems like Thorsten and the fellows that are forced to pay out when things go wrong are getting a little tired of writing checks for mismanaged supply chains. In my opinion this is step 1 of a substantial change in the supply chain insurance industry.

The change cycle will probably look something like this:

  1. Supply chain evaluation by the insurer post claim (already happening)
  2. Supply chain audit by the insurer post claim
  3. Claim denial for substandard risk mitigation processes
  4. Supply chain audit by the insurer pre policy issuance
  5. Policy denial by the insurer for substandard risk mitigation processes.

What does this mean?

It means you better get your act in gear in understanding the risks facing your supply chain.

It means you better get some plans in place to mitigate those risks, especially if you want to rely on an insurance instrument to protect you.

It means you better start taking a hard look at your supply chain organization from the top down.  Are they even asking the right questions about risk?  Do you know what the right questions are?

What do you think the right questions are when evaluating risk in your supply chain?  I would love to see a good discussion in the comments about this.


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