Businesses rely on supply chains to keep customers happy while maximizing profits. Unfortunately, supply chain mishaps can occur that create unexpected disruptions. These disruptions can damage reputations and put businesses at risk of financial ruin.
In Hawai’i, from unplanned IT outages and adverse weather to natural disasters, no business is completely immune to the impacts of local or global supply chain problems. The good news is that commercial lines insurance can help your business better manage supply chain risks.
Importance of Insurance for Supply Chain Management
In simple terms, supply chain management is the flow of goods and services from their origin to their final destination. Most businesses have back-up plans in place to minimize the impact of supply chain issues. However, it’s not always possible to prepare for certain types of supply chain events.
Whether it’s a labor shortage, public health emergency, industrial accident, or production process hurdle, any unplanned event could prevent your company from getting the supplies it needs to carry on business as usual.
How Commercial Lines Insurance Can Help with Supply Chain Management
Casualty and property insurance products are generally included under commercial lines insurance. These types of insurance products protect businesses from potential losses that they might otherwise be unable to afford. Insurance policies are also custom-tailored to the unique needs of businesses to ensure adequate coverage.
When it comes to supply chain risks, some disruption is inevitable. Fortunately, commercial lines insurance can help protect organizations from these risks. Some policies that your business should consider carrying include:
Business Interruption Insurance
Business interruption insurance is an essential policy for most businesses, particularly those most at risk of supply chain issues. This type of insurance can be purchased as a standalone policy or bundled in a business owner’s policy (BOP) with other coverages, such as commercial property insurance and general liability insurance.
With business interruption insurance, businesses are covered if they are forced to shut down. Coverage typically helps with expenses of revenue, loan payments, payroll, taxes, and relocation costs. It may also cover rent, lease payments, or mortgage payments for the space that your business operates.
Marine Cargo Insurance
Maritime accidents can happen in different ways, from engine failure to the grounding of cargo ships. With marine cargo insurance, businesses can protect against serious financial losses due to supply chain exposure.
Marine cargo insurance covers goods that are lost or damaged, often beginning at the warehouse at the point of shipment and extending to the warehouse at the point of the destination. Coverage also includes all intermediate transit by truck or rail.
Trade Disruption Insurance
While business interruption insurance and marine cargo insurance may seem like sufficient safety nets, they may not always provide adequate protection if a supplier cannot provide or accept goods due to a loss event within its facilities. In this situation, trade disruption insurance can be invaluable.
Trade disruption insurance is coverage that protects against lost profits caused by disruptions in the supply chain where there is no damage or physical loss to the business’s or supplier’s assets. This type of coverage is often used to fill any gaps in coverage left by other policies.
Cyber Insurance
When it comes to supply chain risk management, a lot of businesses are facing a growing number of IT-related threats that can actually shake up their supply chains.
Having cyber insurance helps to cover a business’s liability for data breaches that involve sensitive customer information, such as credit card numbers, Social Security numbers, and account numbers.
Cyber liability can prevent major financial losses by covering legal fees and the related expenses that can result from a cyber security incident.
This coverage typically helps with the cost of notifying customers about a data breach, recovering compromised data, restoring personal identities of affected customers, and repairing damaged computer systems.
Other Key Tips for Mitigating Supply Chain Risks
While insurance is one of the best ways to manage supply chain risks, it should not be the sole line of defense for a business. Suggestions to limit their exposure to supply chain risks include taking some preventative steps, such as the following:
Select back-up vendors and suppliers.- Assess the supply chain and pinpoint possible weaknesses and risks.
- Develop contingency plans that include supply chain disruption actions.
- Balance supply chain logistics with risk management.
- Invest in the proper technology to link databases across the supply chain.
Though none of these will stop all events from occurring, taking these and similar steps will help businesses limit their risks.
Improve Your Supply Chain Risk Management Strategy with Atlas
Today, to run their business without interruption, many organizations rely on global suppliers. This is why it is so important to take the necessary steps to limit the impact of supply chain disruption with the right insurance.
At Atlas, the combination of our strong local roots and our global resources puts us in the ideal position to help businesses improve their supply chain management. For more information on how insurance can help your business, or to request an insurance quote, contact Atlas Insurance.