Global Logistics—March 2016
Every type of business risk has an impact on the supply chain. And when risk becomes reality, risk managers and supply chain managers work in tandem to keep goods and materials flowing.
In 2016, companies need to be prepared and ready to meet the following top 10 risks, according to the fifth annual Allianz Risk Barometer, which surveyed 824 risk managers and insurance experts from 44 countries.
- Theft, fraud, and corruption. While they rank tenth for corporations overall, theft, fraud, and corruption are the top risks for the transportation industry.
- Political risks. Refugee crises, terrorist attacks, and wars number among the many political factors that stress risk managers. These events can drastically disrupt the supply chain.
- Fires and explosions. The average fire and explosion incident costs a company $1.8 million, the Allianz report states. With that sort of price tag, you can bet the thought of a facility or equipment fire keeps risk managers tossing and turning.
- Loss of reputation or value. Corporations risk financial losses if their global reputation takes a plunge. To mitigate this risk, many companies focus on environmental initiatives and social responsibility programs.
- Macroeconomic developments. Cheaper commodity prices and inflation are impacting the United States and many of its global trading partners in unexpected ways. Lower oil, gas, and steel prices are actually stressing the supply chain in some ways, the report notes.
- Changes in legislation and regulation. Governments sometimes enact economic sanctions and protectionist policies that leave businesses trading with those countries at a disadvantage.
- Natural catastrophes. Losses due to natural catastrophes were at their lowest since 2009, according to the report, dropping the category down two places from its number-two position in 2015.
- Cyber incidents. The risk of cyber-crimes, data breaches, and IT failures gets higher year over year, and is the greatest long-term future risk, according to the report. Many companies don't have the resources to keep up with this rapidly changing threat, making it one of the most difficult to prepare for.
- Market developments. Non-traditional competitors and startups wielding new methods and technology have also become a concern, with 34 percent of respondents citing market developments as a top issue.
- Business interruption. Business interruption (BI), including supply chain disruption, holds its place at the top of the list for the fourth year in a row. While on the surface, this issue may not seem larger than some of the others, the fact is that BI is the end result of most of the other risks on the list.
While the other risks are the cause, seriousiness interruption is the effect that many business leaders lose sleep over.
In the air industry, cargo service is just as important as passenger service. That's the message the Airforwarders Association, representing 360 companies and more than 300,000 employees who move air cargo through the supply chain, recently delivered to the U.S. Department of Transportation (DOT). The association wants the DOT to assign routes to U.S. passenger air carriers that currently offer air cargo service.
The U.S. DOT recently accepted applications from eight U.S. carriers petitioning to provide passenger service to Cuba. Of those carriers, only five currently operate cargo programs: Southwest Airlines, American Airlines, Delta Air Lines, United Airlines, and Alaska Airlines.
"The opening of Cuba to travel is about more than just moving people, it will also be about trade," says Brandon Fried, executive director of the Airforwarders Association. "The eligibility of any airline that ultimately cannot fill planes with both passengers and cargo should be looked upon less favorably."
Currently, significant airport infrastructure and economic limitations exist within Cuba that present real challenges to trade. Once those challenges are solved, the Airforwarders Association says it looks forward to working with carriers that, as experienced cargo handlers, intend to offer airfreight service to enhance trade promotion with Cuba.
The Department of Transportation plans to study the requests, and issue its final comments and answers in late March 2016.