Volatility and Crises

Transcription

1 Allianz Global Corporate & Specialty SE Volatility and Crises Global Risks for Supply Chains 28 th October 2015, Berlin Jean-Baptiste Régnier 1

2 Table of contents 1 Supply chain as a source of volatility and crisis 2 What do we see as an Insurer to prevent and mitigate volatility? 3 Supply chain Risk Assessment as management tools 2

3 The Supply Chain is defined as all processes involved in manufacturing, distributing, storing or servicing goods, from the basic raw material producer to the final customer. Supply chain for a manufacturing operation 3

4 Reasons for Supply Chain Interruptions Source: Supply Chain Resilience 2014, BCI Business Continuity Institute 4

5 There are 5 key drivers in Supply Chain management Trend Example Risk Impact 1. Globalization Outsourcing, offshoring Local concentrated risks become globally diffused, involving multiple actors 2. Specialization Geographical concentration of production 3. Complexity Product/network complexity 4. Lean processes Single sourcing, buffer stock reduction 5. Information availability (e.g. RFID technology) Track and trace Efficient process can be easily disrupted by localized event Reliance on multiple parts/players in diverse locations reduces visibility and adds latency into monitoring systems While initially efficiency is improved and costs are lowered, fewer alternatives in case of disruption Measures can impede efficient flow of supply chain and transport networks Source: New Models for Addressing Supply Chain and Transport Risk, World Economic Forum

6 Main reasons for Supply Chain Interruptions Different risks by Region Source: Supply Chain Resilience 2014, BCI Business Continuity Institute 6

7 Natural Perils as trigger for Supply Chain Interruptions - (880 in 2013, 905 in 2012, 820 in 2011) 7

8 Table of contents 1 Supply chain as a source of volatility and crisis 2 What do we see as an Insurer to prevent and mitigate the volatility? 3 Supply chain Risk Assessment as management tools 8

9 Prevention and Mitigation as key measures for influencing Volatility Risk Management approach of our Insured Prevention, Physical Protection, Business Continuity Plans of our Insured Backup possibilities, stock management, Multiple supplier sourcing, What happen if culture organization. Resilience and Business Continuity are key enablers for the Insured mitigation plans 9

10 What does Insurance Property / BI Insurance cover? Property Damage coverage provides to the insured the costs to rebuild the location or to replace equipment's, the stocks in case such property is physically destroyed by an insured peril. Business Interruption coverage pays to the insured the ongoing costs and lost profit in case the production is suspended due to a physical destruction of the location (buildings, equipment and stock). Staying in business is key. Companies that are not able to continue to deliver their goods will lose market share and might go out of business. Insurance is designed to put a business in the same financial position it would have been in if no loss had occurred Influence the volatility on the insured! 10

11 Business Interruption (BI) coverage includes intracompany transactions but excludes external streams Contingent Business Interruption (CBI) coverage is needed! 11

12 Table of contents 1 Supply chain as a source of volatility and crisis 2 What do we see as an Insurer to prevent and mitigate the volatility? 3 Supply Chain Risk Assessment as Management tools 12

13 Suppliers locations Example Not all suppliers have the potential to stop the production or serviced. The challenge for the Supply Chain Management is to identify and mitigate those ones which have the potential. 13

14 Assumptions: The better the Supply Chain Management of the insured is structured, the lower the risk of a supply chain interruption (severity and frequency) BCP s are only single location plans. Only if driven by a good management structure will the single BCP on company level lead to sound production availability There is not one ideal organization of supply chain management, this is clearly defined by the structure of the individual company Result: Missing data can be accepted if the insured has a sound Supply Chain Management System. This is what we assess. 14

15 Supply Chain Risk Assessment as Management Tools for the Insured Supply Risk Management (SRM) System (50%) SRM Result (50%) 3 Employees 6 Early Indicator 1 Leadership 2 Policies & Strategy 5 Processes 7 People 9 Supply Chain Performance 4 Knowledge Resource 8 Supply Risk Performance Innovation & learning The model is a Cause and Effect model consisting of: 5 Enablers covering the actions of an organisation, 4 Indicators covering the direct achievements from the actions. E.F.Q.M. based 15

16 Supply Chain Risk Assessment as Management Tools for the Insured (example) 16

17 Network of Supply Chain Simple Example 17