December 18, 2015

Fire and Brimstone: Managing Contingent Business Interruptions in an Increasingly Interdependent Supply Chain

Neil Shenoi

In the recent study “Global Claims Review 2015: Business Interruption in Focus,” Allianz Global Corporate & Specialty (AGCS) reported that increased interdependencies in global supply chains have led to a significant increase in business interruption-related insurance claims over the past five years. Analyzing over 1,800 business interruption claims from 68 countries from 2010 to 2015, the study found fires and explosions accounted for nearly 60% of those claims and that the average BI insurance claim now exceeds $2.4 million, 36% higher than the corresponding average direct property damage claim. Fires and explosions are particularly disruptive to sectors with high levels of interconnectivity and concentrations of risks in single locations, such as automotive, semiconductor, and petrochemicals, among others.

The Tianjin explosions dominated this year’s loss activity and highlighted the necessity of strategic business interruption (BI) and contingent business interruption (CBI) insurance coverage, especially for disruptions that originate from technical or human error. But CBI insurance is not a panacea for addressing key fire and explosion risks in your supply chain and doesn't guarantee a business will avoid resulting financial loss from sub-tier disruptions and their rippling impacts. More large businesses are recognizing the importance of supply chain event monitoring, visibility, and risk management measures to help to inform their CBI insurance policies and minimize income losses from day-to-day disruptions through proactive mitigation.  

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December 10, 2015

Case Study: Why Supplier Capacity Management is Mission Critical

Neil Shenoi

2015 was a rough year for Fuhu Inc.

Named America’s fastest growing company by Inc. Magazine in 2013 and 2014, the maker of the nabi-brand of children’s tablets filed for Chapter 11 bankruptcy on Monday amidst a messy financial battle with its investor and exclusive manufacturer, Foxconn. There’s word that Mattel is “coming to the rescue,” having tentatively agreed to buy the struggling business’s assets for a mere $9.8 million. In this post, we explore the chain of events that lead to Fuhu’s bankruptcy as a cautionary tale of how unmitigated supplier capacity risks, demand variability, and weak supplier relationship management brought a successful consumer electronics company to its knees. 

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