Supply Chain Risk Offering

Supply Chain Risk Offering

2010 & 2011 Catastrophes Emphasize Supply Chain Vulnerability Iceland Volcano ~ $200 million USD per Day >$5 billion USD total economic loss Japan Earthquake and Tsunami ~ $300 billion USD total economic loss ~$30 billion USD insured loss Thailand Floods >$45 billion USD total economic loss

Japan Quake and Thai Flood Contingent Business Interruption (CBI) Munich RE CBI Claims Estimated Total Gross CBI: $2.86B USD Total Insured CBI: $1.98B USD CBI losses not sufficiently insuredand there will be more demand for CBI coverage However,lessCBI limits will be offered by re/insurers in the current market Source: Munich RE

Transparency in CBI What are the critical CBI supply chain interruption scenarios to insuredscaused by a NatCatproperty damage and business interruption loss at a key product suppliers location? What is the CBI risk quality? Is the required information available to the insurer? What is the CBI financial exposure? What are the critical scenarios, key products, involved suppliers, associated business impacts and effectiveness of loss minimization. Source: Munich RE

Non-Cat Supply Chain Disruption 2012 - Nippon Shokubai Company Fire at Himeji plant 20% of global acrylic acid production Used to make diapers 2009 - Kellogg Company Major equipment failure at one plant and flooding at another 50% reduction in EggoWaffle production "I am despondent. DESPONDENT. My 4 food groups are: tacos, skittles, pop, and eggos! (User @KStew411, Twitter)

Supply Chain Risk Example Raw Material Inventory Event Reroute Warehouse Reroute Packaging Reserves Distribution and Sales Free Cash Flow Raw Material Inventory Redundancy At Capacity Warehouse Net Decrease in Production Proprietary and Confidential Information 6

Broker Questionnaire

Supply Chain Self-Assessment Tool

Supply Chain Service Offerings High Level Risk Assessment Map Supply Chain Risk Assessment of Supply Chain Risk Quantification Risk Mitigation Solutions Supplier self assessment Questionnaire to identify Key suppliers Key Products Creation of an analytical tool Graphical matrix of supply chain Supplier to customer Finite # of nodes For each node, identify Key risks Mitigation Supplier contract review Business continuity plans Conduct gap analysis Analysis of risk from current policies (e.g. JIT manufacturing) Develop analytical tool to assess current state risk Based on actuarial and financial modeling principles Built in modules based on the supply chain map and risk assessment Develop risk appetite and risk tolerance statements for corporate strategy Risk transfer solutions Supplier contract analysis (all tiers) Business continuity planning Capital market solutions Internal controls and governance Cost Benefit Analyses Brokerslink Resources towerswatson.com

Supply Chain Risk Process Does my client have exposures? (Broker Questionnaire) What are my exposures? (Client Self-assessment) Identify Assess Quantify Mitigate (Specialized resources) Supply Chain BI Risk Transfer (Brokers & Carriers)

Target Clients Supply Chain risk does not just affect the Fortune 100 companies Fortune 1000 (Mid-market companies) Industrial Manufacturing Assembly Chemical High-Tech Pharmaceutical Retailers

Benefits of SC Risk Offering Direct Benefits Clear understanding of SC Risk Transparency in SC Risk Assessment and Quantification Reduction in SC Risk through Mitigation Better & more appropriate CBI risk coverage Risk Transfer Re/Insurers indicate that coverage will be available but only to those who provide SC risk information. The better the underwriters understand the risk the more coverage they will provide

Competitive Advantage BrokersLink is the ONLY broker in the market that can offer a comprehensive, integrated solution for complex supply chain risk assessment and mitigation

Supply Chain Resources Insurance Broker Reinsurance Broker Risk Engineering Business Continuity Risk Engineering HR and Risk Management Claims Management Catastrophe Risk