Risk assessment in the supply chain Supply Chain
- Slides: 14
Risk assessment in the supply chain Supply Chain Risk Leadership Council Developments in Insurance January 30 2008 Confidential – Do Not Forward Outside SCRLC Confidential 1
Survey (What capability we shall focus on) § Top 3 risks (supply chain complexity, supplier capability, recovery capability) have high-linkage to 7 key capabilities, but no one has full capability score on “Supplier Business Interruption Risk Insurance” Why might that be? Confidential 2
Outline ~ 30 minutes § Objectives of session § Review traditional versus new perspective § New challenges – illustration from Katrina § Risk assessment process § Loss database § Cross-matching opportunities Confidential 3
Objectives of session § To share current thinking on SCR assessment in context of developing a new risk transfer tool (SCBI) § To consider lessons from the SCRLC Supplier Reliability track Confidential 4
From the traditional to a new world § Historical focus on protecting physical assets § BI becomes more important – Katrina ratio of BI: PD claims (70: 30) § The journey from - traditional Business Interruption (BI) insurance to Contingent BI to Supply Chain BI § Global risks and the ‘Over-Optimised Supply Chain’ (WEF 2008) Confidential 5
The concept of supply chain networks* E. G LEVEL 0 People Employees LEVEL 1 Process Value creation (production) LEVEL 2 Infrastructure Physical flow (logistics) LEVEL 3 Organisation networks Strategic (partnerships) LEVEL 4 External environment Regulatory, Exchange rates, Country, region issues * Derived from Cranfield University – Supply Chain Risk study Confidential 6
SCBI Risk Assessment Process 1 Basic data input Form (Exposures) Risk factor assessment Workshop 1 (Controls). 6 2 Pricing Tool + input from - benchmarking - BI Surveys - BCM assessments EML and Profit Impact Analysis Workshop 2. Data/Info to define supply & customer risk 3 Accumulation db 4 EMLs and limits 5 Risk modifiers that either increase or decrease rate % rate to be applied to limits Capacity Agreed Loss Calculation 7 Confidential SCBI Insurance premium pricing 7
Supply chain risk factors Exposures Controls 1. Commodity Shortages / Price Fluctuations 2. Supplier Reliability 3. General Availability, Cost, Quality Of Labour 4. Internal Supply 5. Accidents / Errors 6. Malicious Intervention 7. Supply Chain Infrastructure 8. Customer Demand 9. Obsolescence Of Product / Inventory / Technology 10. Product Quality 11. Incidents / Natural Disasters 12. Regulatory Concerns 13. War, Terrorism, Other Geopolitical 14. Other External Influences (Cross-match with SCRLC Supplier Reliability factors) Confidential 8
Supply chain risk framework Commodity Shortages / Price Fluctuations Exposures Controls? Supplier Reliability General Availability, Cost, Quality Of Labour Internal Supply Accidents / Errors Malicious Intervention Supply Chain Infrastructure Customer Demand Obsolescence Of Product / Inventory / Technology Product Quality Incidents / Natural Disasters Regulatory Concerns War, Terrorism, Other Geopolitical Other External Influences L ICA YS PH OC ESS PR L NA O I UT TIT INS Risk Assessment Control Activities 1 s XTie Yo t-T r Do Pr ur ier wn im co ar mp yc an str us ea y tom m er cu sto Cross-match with SCRLC Supplier Reliability factors Confidential 9 me r
Supplier reliability - Controls Supplier business continuity plan Internal material contingency plan Industry analysis Sustainability / Regulatory Capacity analysis Inventory target setting Strategic material planning / RCCP / Materials at Risk Material change management process Initiative management process Lane risk assessment Supply network visibility Suppler capability assessments Internal capability assessments Supplier BI risk insurance Supplier relationship / partnership Crisis management / response Risk analysis (data modelling, measurement, etc) Confidential 10
Visualising revenue dependencies Confidential 11
Risk grading Confidential 12
Opportunities § Building a rich source of data § Benchmarking § Best practice § Loss evaluations and risk quantification Confidential 13
Questions? Confidential 14
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