FM Global, a commercial property insurer and supply chain resilience expert, has warned of the current global supply chain crisis and six factors exemplifying threats to business resilience.
Unsurprisingly, the COVID-19 pandemic topped FM Global's list of facets of the supply chain crisis that threaten businesses as it disrupted demand and product supply, setting up a bullwhip effect of supply and demand mismatches.
“Although the pandemic triggered supply chain problems, other contributors are the proliferation of chip-based products and intensification of demand, which aren't going away,” FM Global said.
The insurer identified cyber risk as another factor impacting business resilience as the pandemic forced businesses to go digital. It explained that since the pandemic started last year, cybercrime has become a big business and a geopolitical flashpoint, making cybersecurity an integral part of business strategy.
Other factors include:
- Port backlog
FM Global noted Goldman Sachs' estimate that US$24 billion of goods have been lingering outside of California ports alone as ocean-shipped goods have accumulated faster than workers can move them along.
- Truck driver shortage
FM Global revealed that many countries lack enough truck drivers to move the goods that are backlogged in ports and elsewhere. For example, according to the International Road Transport Union, 20% of Eurasia's road transport driving jobs were unfilled in the latest review. Meanwhile, the American Trucking Associations estimated that 80,000 truck driving jobs were unfilled in the US.
- Deadly floods
“Although no single weather event can be conclusively attributed to a changing climate, flooding is a well-documented effect of warming temperatures and a growing risk to business,” FM Global said.
- Chip shortage
The insurer explained that the pandemic closed factories and triggered a surge in technology demand, affecting auto, gaming, smartphone, and medical device manufacturing, among many other industries, possibly as far as 2023 or beyond.
Commenting on the report, Doug Backes, vice president and manager, staff claims, at FM Global, said: “The 2021 FM Global Resilience Index is designed to assist organizations in optimizing their supply chains in good times and in bad, by providing valuable data on the relative resilience of countries' and territories' business environments.”
Meanwhile, Eric Jones, vice president and global manager of business risk consulting at FM Global, said in a previous statement that resilience and property-related risks are usually a blind spot when making major business decisions.
“The index is a great way to help shine a light on that, to get people thinking about risks that are associated with where you're doing business in the world, or where you plan to do business. And it's not just your own internal facilities and people and where they're located, but it's also wherever you might have business dependencies in the world, especially within supply chain, logistical concerns, and even your customers,” Jones added.