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Interconnected risk requires a risk management rethink

In today's interconnected world, no company is insulated from what's going on in other parts of the world politically, economically or technologically. Tangible and intangible risk proliferates, and inter-connectivity of risk is creating a daunting new risk landscape.

At a recent roundtable debate hosted by CNA Hardy, the impact of interconnected risk and ways to navigate this new risk landscape were discussed. The consensus was risk management requires a rethink.

The following is an extract from the roundtable. Click here to read the full report.

Technology is shrinking the world

In many ways, technology is at the heart of interconnected risk. Not only is it giving us capabilities that we never dreamt of before, it is the facilitator that is driving businesses to outperform each other; to form more global relationships and deliver a cheaper, better and faster service.

"The inherent interconnectivity created by technology creates risk that really kicks in at a macro level" commented John Ludlow. Ailsa King agreed: "technology is making the world much smaller in terms of interconnectivity, and clients' reliance on other regions and other parts of the world is changing business models, which creates a new set of risks both on a macro and micro basis."

One of these new areas of risk that really excited roundtable attendees was supply chain.

Roundtable participants:

  • John Ludlow, CEO, Airmic
  • Jonathan Blackhurst, Group Head of Risk Management, Capita
  • Ailsa King, Chief Client Officer, Marsh
  • Dave Brosnan, CEO, CNA Hardy
  • Rhona Beuge, VP international specialty, CNA Hardy

Supply chains are less resilient than we think

Rhonda Beuge observed: "I think organisations are quite good at managing physical goods across international borders despite political challenges. The question now is how they manage the intangible supply chain risks - such as information and data. How do we regulate for new technology risk, which has no defined borders?"

Ailsa King described how technology risk can impact the supply chain.

"When you think about how goods move around the world, we are still reliant on large container ships. When these ships dock in harbours the majority of unloading is now automated and tech driven. If something goes wrong with the technology, this can create supply chain risk as goods won't reach their specified destination in the expected timeframe. So there are still traditional marine and cargo risks, but the tech liability and supply chain risk are new."

John Ludlow offered a positive view on how technology can contribute to the management of supply chain risk by enhancing management insight and enabling more rapid risk mitigation.

"Information is key. In a totally connected supply chain, technology can help you to see the goods, their condition, and alert the risk radar as soon as something is wrong. If you have your risk indicators in place and you are sharing information properly across your supply chain you can mitigate a lot of risk."

Speed is of the essence

Jonathan Blackhurst, by contrast, chose to draw attention to the contagion risk that technology can create.

"I see a big shift as we try to change as an organisation, the supply chain has become easier to get real time performance measured and monitored, but what we don't see is the recognition that this reliance on technology increases the speed of contagion."

You cannot sit back and wait to see how a potential problem develops, he explained. "Instead as soon as indications show something is not quite right you need to investigate immediately, or it could be too late. Executives are waking up to supply chain risks, but we need to drive home to them that speed is of the essence".

Dave Brosnan summed up the thinking round the table with a perspective on how to build true resilience into the supply chain.

"I think a really resilient supply chain is one that takes into account the tangible and intangible risks. In my experience, and what comes up time and again in our research, is that everyone tends to focus on the tangible problem in front of them and lose focus on the more hidden intangible risks that emerge when a tech-enabled supply chain has failed."

Click here to read the full roundtable report.