For the last several years Allianz has published a concise and informative report on the top risks that businesses face globally. It is a great opportunity to think about how these risks could affect your business operations and what the impact would be. When thinking about risk, it is important to think about "materiality" and what "financial impact" would be material for your company to cause a disruption. Even through many of the risks on this year’s report are readily insurable, the "disruption factor" of having to manage through a loss is worth considering.
A recent article in the Wall Street Journal highlighted the plight of Lumber Liquidators who has been struggling to deal with the fallout from a scandal that was caused due to the use of formaldehyde in its wood. You may have seen this on a “60 Minutes” program in early March. If you are a retailer after reading this article and watching the 60 Minutes TV spot you must be asking the question. How well do I know my 3rd party vendors and what process, if any, does my organization have to contain a similar event?
Topics: Claims Management, Insurance, Lumber Liquidators, Manufacturing and Distribution, Reputational Risk, Risk management, Risk Management Blog, strategic, Strategic Risk Management, supply chain, Supply Chain Risk, The ALS Group, Total Cost of Risk (TCoR)
As organizations increase their operations abroad, their supply chain risk also increases. A risk in doing business abroad is the reality that overseas supply chains are increasingly vulnerable to political uncertainties. According to a study reviewed by Zurich® Insurance, supply chain disruptions can cause an average 25 percent reduction in share price over two years. Can your company afford that risk? Other studies show that the stronger a company’s risk management practices, the more robust its growth. Those companies with “emerging risk practices” were less profitable, according to Zurich®. According to the American Quality and Productivity Center in a recent survey of 196 companies, 77 percent of the respondents experienced at least one supply chain glitch in the previous two years. And given companies’ tendency toward lean manufacturing, a chink in the supply chain can drastically hurt production and profits almost immediately.
A recent Wall Street Journal article about a high profile factory accident, this time in Cambodia, brings new emphasis to the fallout that can arise from supply chain risk. Asics Corporation, the Japanese sport shoe manufacturer, sourced some of its shoes from a factory in Phnom Penh. In April 2013, a mezzanine floor collapse killed a young father and a young woman who, reportedly, was only 15. The incident also injured a number of other workers. Fallout from the incident was almost immediate. Asics instructed its nine suppliers in Cambodia to join Better Factories Cambodia, which keeps tabs on working conditions in the Cambodian garment industry.
Topics: Enterprise Risk Management (ERM), Enterprise Risk Management, ERM, Manufacturing and Distribution, Reputational Risk, Risk Management Blog, Strategic Risk Management, supply chain, Supply Chain Risk, TCoR, Total Cost of Risk
Product contamination and product recall risks are becoming prevalent for many industries. In 2008 there were 351 FDA Class I recalls. Over the next 24 months, the number of Class I recalls had jumped to 1,499. The FDA defines a Class I recall as a situation in which there is a reasonable probability that use or exposure to a product will cause serious adverse health conditions or possibly death.
Topics: Claims Management, Manufacturing and Distribution, Retail, Risk Management Blog, Strategic Risk Management, Supply Chain Risk, TCoR, The ALS Group, Total Cost of Risk, Total Cost of Risk (TCoR)
The recent London Olympic Games drew a total of over 219.4 million viewers over the course of 14 days. What people don’t realize is the way Risk Management factored into the success that was the 2012 London Olympics. In particular, the use of Strategic Risk Management was employed by the Olympics Organizers to evaluate and implement risk mitigation policies and procedures for the Games of which the general public was not even aware. A recent article by Will Jennings in Harvard Business Review, “The Olympics as a Story of Risk Management”, looks at the Games from a Risk Management perspective. The article reveals how the International Olympic Committee (IOC) evaluated Strategic Risk Management and how some scenarios could have damaged the Olympics’ reputation and affected the international competition politically and strategically within certain markets. The fact that Strategic Risk Management played an important role in their decision making process is a positive sign that illustrates the significant role Strategic Risk Management can play in successful event planning.
As a result of several natural disasters occurring in significant industrial areas, the crucial importance of supply chain risk management has been brought to the forefront over the past year. Ongoing floods in Thailand (the worst they have experienced in almost seven decades) have exacted a harsh economic toll on two of Japan’s largest auto companies, Toyota and Honda, causing production disruptions that could last for up to three months.