For the third year in succession business interruption (BI) and supply chain risk is the top peril in the Risk Barometer with almost half (46%) of the responses rating this as one of the three most important risks for companies, up 3% year-on-year. Fire/explosion (43%) and natural catastrophes (41%) are the major causes of BI companies fear most.
The impact of the subsequent disruption potentially affecting a company, its suppliers and customers often outweighs the physical damage itself. At $1.36m, the average business interruption insurance claim is already 32% higher than the average direct property damage claim ($1.03m). “Businesses spend a lot of time assessing direct damage and looking at their own BI impact but more work needs to be done analyzing the risks associated with suppliers and customers,” says Paul Carter, Global Head of Risk Consulting at AGCS. Supply chain risk management remains a gap in many multinational companies’ risk management programs. Many businesses still do not have alternate suppliers. “Collaboration between different areas of the company is necessary in order to develop robust processes which identify break points in the supply chain,” explains Volker Muench, Global Practice Group Leader, AGCS Property Underwriting.