VALUE DRIVERS IN THE MANUFACTURING SECTOR

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1 VALUE DRIVERS IN THE MANUFACTURING SECTOR WILLIS MANUFACTURING & INDUSTRIAL PRACTICE

2 THE RISK UNIVERSE As the U.K. economy emerges from recession, the manufacturing sector which is now growing at an annual rate of 3.4% is making an important contribution to the recovery. Production is expanding and as customer confidence begins to return, it is even more essential that manufacturers manage any threat to their business objectives and key performance indicators. The operating environment remains volatile and unpredictable and the winners will be those who can anticipate change, adapt their scope of business activities and focus on what drives long-term strategic value for the business. Combined with the ongoing trends of globalisation, sustainability and the move to services, and always subject to the insatiable need to innovate, companies increasingly require a robust risk management programme to safeguard and support their success. VALUE DRIVERS Creating value for the modern manufacturer is about more than just making things. It requires a range of expertise to be brought together to convincingly deliver value in an area of focus. This approach delivers organisational value, however the realignment of resource can also create a new universe of risk which must be monitored and managed. The insight gained from our research has led us to group the key value drivers in the manufacturing sector into the eight categories illustrated opposite. These drivers will be instantly recognisable to any company operating in the manufacturing sector, yet the order of prioritisation will be unique to each.

3 INFORMED ANALYSIS GLOBALISATION SUSTAINABILITY MOVE TO SERVICES

4 Focus Directing business strategy to achieve competitive advantage and focus on opportunities will attract diverse risks which need to be understood and managed. Customer Insight Closer alignment with a customer segment allows companies to leverage their insight and therefore differentiate themselves in a competitive environment. Brand and Intellectual Property While reputation of a product is a key value driver, increased globalisation and closer alliances makes brand and intellectual property harder to sustain. Cost and Efficiency Properly executed cost management and efficiency present an opportunity to focus expenditure where it delivers maximum return on investment. Talent This is a critical issue to business success and manufacturers are finding it increasingly difficult to attract and retain the right level of talent. Innovation Investment in research and development is a key value driver applicable to the product itself, production technologies and supply systems. Partnerships and Alliances Increasingly manufacturers are working in close partnership with their customers, leading to a narrower more select base with better informed relationships. Agility The ability to rapidly respond to change adapting knowledge, processes and products in line with customer and market demand.

5 INTEGRATED SOLUTIONS We organise the Willis response to support businesses key value drivers and to demonstrate the alignment between an organisation s strategy and its associated risks. Although tailored to the needs of each client, the key steps of the process are: IDENTIFY RISK and EXPOSURE Design methodology to identify and capture the key value drivers and threats to business Map risk profile Gap analysis of insurance against risk Stress testing and claims scenarios Review of existing measures and controls to include suppliers, customer relationships procedures Define risk tolerance Analyse risk appetite Cost of capital Model loss frequency and severity Review alternatives Retention Transfer insurers or capital markets Mitigation Avoidance Implementation Optimum risk strategy A risk management and insurance programme that better meets the needs of the business, through developing a deeper understanding of the business s value drivers and risk appetite

6 INDUSTRY EXPERTISE ABOUT US Willis is a leading risk and insurance advisor. With 15 offices across the U.K. and over 400 worldwide, we have regional teams located close to our clients. We build tailored insurance and risk management programmes to support our clients with their business challenges. The Willis Manufacturing & Industrial Practice has worked with businesses in the manufacturing sector for many years and as a result we have a deep insight into the opportunities and challenges manufacturers face. Combining our sector experience with our risk management, claims and insurance placement expertise, our proficiency encompasses both traditional and emerging business exposures. We use analytics and industry specific research to identify and address the complex risks faced by manufacturers in today s dynamic global economic and political environment. Recent initiatives include: Global sourcing and supply chain management risk mitigation and insurance devices Analysis of the impact of product recall and development of insurance solutions Guidance on satisfying regulations and compliance across multiple territories The practice holds regular networking forums, which provide an opportunity for clients to meet industry experts and exchange experience with fellow practitioners. Past subjects have included: Supply chain Product recall Navigating international risk Please contact us for information on upcoming events. CONTACTs Fiona Davies Practice Leader Tel: +44 (0) fiona.davies@willis.com Julien Hampson Account Director Tel: +44 (0) julien.hampson@willis.com This publication offers a general overview of its subject matter. It does not necessarily address every aspect of its subject or every product available in the market. It is not intended to be, and should not be, used to replace specific advice relating to individual situations and we do not offer, and this should not be seen as, legal, accounting or tax advice. If you intend to take any action or make any decision on the basis of the content of this publication you should first seek specific advice from an appropriate professional. Copyright Willis Limited All rights reserved. Willis Manufacturing & Industrial Practice is a trading name of Willis Limited. Registered number: England and Wales. Registered address: 51 Lime Street, London, EC3M 7DQ. A Lloyd s Broker. Authorised and regulated by the Financial Conduct Authority. FP1686/13074/07/14