Supply chains can be a complex system of moving parts, organizations, and variables. Inevitably, a supply chain will encounter a variety of risks throughout its networks. These risks evolve as companies adapt to the conditions that cause them. Below are three current risks that companies are experiencing in today’s supply chain:
Theft is always a risk when shipping goods internationally or domestically. In the US alone, cargo theft is estimated to be a nearly $35B problem*. What makes cargo theft such a leading risk in the current environment is the widespread transit delays being experienced globally. Nearly all theft occurs while cargo is at rest, whether stopped roadside, in a warehouse, or at another cargo handling facility. With shippers and carriers facing a global capacity crunch, dwell times for cargo can increase significantly. Nonetheless, the most effective way to secure freight is to keep it moving, monitor it, and have a close relationship with local law enforcement or a security team capable of responding and recovering the freight if possible.
While digitization aims to increase the overall safety and efficiency of logistics operations, there is still room for cybercriminals to attempt a breach. The most common types of cybercrime in the supply chain are bank fraud and ransomware, where hackers attempt to gain access to bank routing information and other financial data. Companies that do not invest in strong cybersecurity practices pose the highest risk for these types of attacks, as their controls may not be as effective as companies that have dedicated cybersecurity staff and programs in place.
A great way to avoid being the victim of cybercrime is to educate and train all employees on recognizing phishing, social engineering, and fraudulent emails or calls. Training, paired with a cybersecurity program based on an industry-standard cybersecurity framework, will act as a good baseline defense against hackers and fraudsters.
Further, insurers have recently begun adding cyber exclusions to most marine policies. This exclusion aims to protect insurers from losses caused by a widespread cyber event, such as a carrier being hacked. This is an evolving situation, and the industry is still trying to determine the impact of this specific exclusion.
Though catastrophic events are uncommon in most areas of the world, they can still strike at any moment. When such an event does occur, damages and losses can be well, catastrophic. Examples of these types of events are hurricanes, wildfires, tornadoes, and explosions. Of late, there have also been a number of massive container loss events on the open seas caused by severe storms.
Alex Williams of Expeditors’ corporate insurance group explains that these types of large-scale commercial losses have made it challenging to insure goods exposed to certain risks, such as catastrophe coverage for warehousing goods in coastal areas. There are, however, ways to mitigate the impact of certain catastrophes, such as preparing for hurricanes before the season starts.
Regardless of a company’s size or breadth, no company is immune from supply chain risk. However, there are ways to mitigate or prepare for certain perils that will lessen the chances of them affecting the organization as a whole. For more information about supply chain risk, or to request a risk analysis, contact ECIB today.