Taking the strain
After a series of relatively benign years, the first quarter of 2010
has produced one of the most catastrophic periods on record, with
earthquakes affecting Chile, China and Haiti, while Windstorm
Xynthia wreaked havoc across France and Spain. Subsequent perils
such as Cyclone Phet which struck Oman in June, the extreme flood
events experienced in Brazil, France, China and Poland, and the
volcanic ash cloud from the Eyjafjallajokull eruption which shut down
Europe’s airspace are all serving to make 2010 a truly catastrophic
year. Major disruptive events are no longer the stuff of 1 in 100 or
1 in 250 type events; large scale incidents are on the increase both
in terms of severity and frequency.
Earthquakes, volcanic eruptions, the ongoing economic instability
from the financial crisis; hyperactive hurricane season forecasts;
major flooding events; political unrest; industrial strike action - all
these incidents are exposing the fragility of our society and driving
home the importance of enhancing our resilience to counter them.
The globalisation of our operations, the increasingly interconnected
nature of the systems and processes which underpin our daily
activities
, and the drive for greater outsourcing to reduce costs
have left organisations more exposed then ever to the impact of
such events. Whereas once our proximity to the incident itself
affected the degree of impact we experienced, now an earthquake
in China can halt production at a microchip manufacturing plant in
Germany, or a flood in Mumbai can disrupt customer help-lines in
the UK.
Our reliance on outsourced manufacturing and services means that
we can no longer view risk management within the confines of our
organisation’s ‘four walls’. Enterprise-wide risk management
encompasses all of the components that make up your organisation,
that enable you to manufacture your products or deliver your
services, including your suppliers. By outsourcing the business
activity we have not also outsourced the associated risks – if you
fail to deliver your clients will not accept supplier failure as a valid
excuse.
As operations continue to expand and supplier networks grow, so the
remit of your risk management activities must expand to ensure the resilience standards which you demand within your organisation are
adhered to by your suppliers. The increasing frequency of catastrophic events will put ever greater strain on your supply chain, and only by
regularly stress-testing the risk management capabilities of not only
your own processes but also those of your critical suppliers can you mitigate the risk of service disruption due to supplier failure.
Shaun Brook is Senior Executive Officer of Kane (Bahrain) and
is Practice Leader, Insurance Management. He is contactable on
tel +973 1711 1020 or Email shaun.brook@kane-group.com |
