Shippers and logistics companies can expect the threat of business interruption from supply chain problems to remain elevated in 2022, as freight congestion, the threat of cyber attacks, and natural disasters weigh heavily on business leaders’ minds.
Two recent risk management reports put the problem into perspective, outlining the major threats to global supply chains in the coming year.
Everstrem Analytics, which provides predictive analytics solutions to companies worldwide, released its Top 5 Supply Chain Risks for 2022 report this week, citing ocean freight bottlenecks and shifting inventory strategies as top issues and emphasizing a growing focus on risk management strategies in the wake of the coronavirus pandemic.
“Pandemic shortages have revealed the global supply chain’s fragile interdependence, pushing companies in every industry toward comprehensive risk assessments and flexible response plans,” Everstream’s CEO Julie Gerdeman said in a statement announcing the report. “We developed the Everstream 2022 Risk Report to provide advice and commentary on where to double down on risk mitigation efforts to keep supply chains stable.”
The company’s top 5 supply chain risks range from environmental to regulatory concerns; they include:
Worldwide Water Instability. Two thirds of the global population will face water shortages by 2025, according to the report. A steady water supply is necessary for production and cooling equipment for pharmaceuticals, tech products, paper, garments, food processing, and other manufacturing industries.
Ocean Freight Bottlenecks. Facing record-low inventory levels, strong consumer demand, and ongoing Covid-19 impacts on logistics and workforces, the global ocean cargo industry will continue to suffer from port congestion and delays in 2022.
The Continuously Changing Workplace. As the Omicron variant of Covid-19 spreads across the world, the risk of infection will force companies to reassess workplace safety and worker compensation to avoid the risk of long-term disruptions from industrial actions or outbreaks of disease.
Just-in-Time Shifts to Just-in Case. As the pandemic exposed flaws in “just in time” inventory systems, businesses have been exploring a shift to the “just in case” model, increasing buffer and safety stocks of critical components or best-selling products.
Increased Regulatory Scrutiny. Sustainability disclosure and reporting requirements for businesses continue to gain momentum amid scrutiny from governments, investors, and customers alike. Further regulations impacting global supply chains will likely be enacted in 2022.
Separately, global insurance carrier and risk consultancy Allianz Global Corporate & Specialty (AGCS) released its Allianz 2022 Risk Barometer this week, outlining the top business risks companies will face in the year ahead. The top three are: cyber incidents (44%), topping the list for only the second time in the survey’s 11-year history; business interruption (42%), dropping to a close second in this year’s report; and natural catastrophes (25%), up from sixth place in 2021.
The annual survey polled 2,650 experts from around the world, including CEOs, risk managers, brokers, and insurance experts, and found that the past 18 months have been a wake-up call for businesses to focus on resilience and transparency. Forty-five percent of those surveyed said recent supply chain disruptions had a considerable impact on their industry.
“’Business interrupted’ will likely remain the key underlying risk theme in 2022,” AGCS CEO Joachim Mueller said in a statement summarizing the report. “For most companies, the biggest fear is not being able to produce their products or deliver their services. 2021 saw unprecedented levels of disruption, caused by various triggers. Crippling cyber-attacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks wreaked havoc.”
Mueller continued: “This year only promises a gradual easing of the situation, although further Covid-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies.”
Although cyber risks topped the list of concerns globally, in the United States, business interruption ranked first (50%), followed by cyber incidents (37%), and natural disasters (35%0, according to the Allianz report.