Extreme Weather Points to Value in Protecting Supply Chains

November 11, 2015

The Insurance Institute for Business & Home Safety, citing a new U.S. Government Accountability Office report, “Federal Supply Chains: Opportunities to Improve the Management of Climate-Related Risks,” urged the federal government and private sector to better understand and protect against supply chain risks from weather-related events.

The GAO notes the federal government spent about $445 billion in fiscal year 2014 for goods and services such as disaster response products and telecommunications. Various federal agencies have had their supply chains disrupted by weather-related events, such as Hurricane Sandy. Federal agencies have developed, or begun developing, adaptation plans in response to executive orders and implementing guidance issued by the White House Council for Environmental Quality (CEQ). Climate-related risks to federal supply chains were expected to be specifically included.

“If the federal government hardens their supply chains, which would help increase the reliability of public-supplied goods and services, that sets a good example for the private sector as well,” said Julie Rochman, president and CEO of IBHS. “We hear a lot of talk about ‘running government like a business.’ Well-run businesses create and test continuity plans. Government agencies that provide products and services that people and private sector businesses depend upon have an obligation to be ready to continue operations when disasters large and small occur. The GAO report recommends that a more complete understanding of climate-related risks be developed and acted upon. Such actions could serve to make our nation more resilient.”

Both private sector and public sector supply chains are disrupted by earthquakes, floods, hurricanes, winter weather, thunderstorms, tornadoes, and wildland fires. “There is no area of our country that is without real risk,” Rochman noted, “so preparing ahead of time is the only prudent thing to do.”

Like the federal government, business owners need to understand and be prepared for disasters that occur in their community or across the globe. Absent planning, supply chain breakdowns also can have a devastating effect on the bottom line.

IBHS has developed information for businesses to help them understand and reduce supply chain risk. “Supply Chain Management: Reducing the Weak Links in your Business’ Supply Chain” discusses the importance of business continuity planning and how vulnerabilities in the overall supply chain can lead to costly business disruption. Focusing on the following steps will help businesses strengthen supply chains:

  • Identify key links in the supply chain, including prioritizing critical suppliers.
  • Assess large and small critical suppliers’ vulnerability to natural and man-made hazards and confirm they have business continuity plans in place.
  • Understand early warning signs of supplier trouble, and be ready with contingency plans.
  • Closely monitor regions where natural and man-made disaster have hit that might impact key suppliers.

“A broken link in any part of a supply chain can cause a truly catastrophic domino effect,” continued Rochman. “Planning for supply chain disruptions helps business – or government agencies – stay in business. Having a plan reduces business vulnerability and provides organizations with a competitive edge in our global economy.”

IBHS developed and offers OFB-EZ (Open for Business-EZ), a free, easy-to-use business continuity planning toolkit designed to help small businesses successfully prepare and recover from any type of disaster.

Source: IBHS

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