Supply chain resilience and improved risk transfer decisions

A board-level risk assessment at this fast-growing, global premium drinks company highlighted the importance of supply chain resilience. A framework, processes and toolkit were identified as critical success factors to support business continuity planning. In particular a simple, useable tool was required to add value through better definition of business interruption (BI) insurance requirements.

Goals were to understand insurance
-  purchasing in terms of 
-  supporting financing decisions (finance risk)
-  understanding potential implications of loss of coverage
-  making better calls on use of capital - mitigation -v- finance

Zurich consultants were engaged, and worked closely with the client’s own risk managers, to develop a simple spreadsheet-based model of profit flow through the supply chain allowing the impact of various interruption risk scenarios and continuity plans to be assessed.

The key benefits have been:

• Ensuring that pricing is appropriate to the actual risk - the BI information produced is of high quality and in significant depth, giving an excellent insight into the exposures inherent in the business.  Underwriters are now able to fully evaluate risks and provide the breadth of cover needed at the most competitive price.  Without this information, underwriters make a number of assumptions regarding BI exposures resulting in inadequate and/or overpriced cover.
• Purchasing the appropriate limits - information provided through the BI modelling process allows the client to decide what limits are needed, avoiding too little, or too much insurance and purchase of unnecessary (and expensive) excess layers.
• Supporting business decision making around risk management - the information gathered during the modelling process provides a valuable insight into the financial consequences of risks and levels of risk interdependency. This supports clear and accurate business decision making on risk management / risk improvement.  The work undertaken has provided a great platform for streamlining processes and supporting the wider group vision on business continuity.