Global Risk Management Survey
October 1, 2025 9 mins
Supply Chain or Distribution Failure: Navigating the New Normal
Supply chain failure ranks seventh globally in 2025 — and is projected to fall to twelfth place by 2028. As weather-related disruption, geopolitical tension and cyber threats converge, organizations must balance efficiency with resilience and diversify sourcing.
Key Takeaways
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Supply chain disruption is an emerging and accelerating risk, affected by natural disasters, infrastructure collapse, strikes and shortages and overreliance on single suppliers.
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Mitigating supply chain risk will require companies to prioritize resilience, transparency and adaptability.
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Supply chain resilience is a core contributor to business continuity, competitiveness and long-term success.
Supply Chains Need to Withstand Growing Volatility
Since 2021, supply chain and distribution failures, ranked seventh in our Global Risk Management Survey, have emerged as a defining challenge for business leaders. A global pandemic, mounting geopolitical tensions and extreme weather events combined with shifts in trade policies have forced companies to reassess and revamp their critical supply chains.
It hasn’t always been like this: For decades, businesses around the world maximized efficiency and profit by spreading their production, minimizing inventory and relying on just-in-time delivery. While profitable in stable times, these strategies can trap businesses in a web of interconnected risks in unpredictable times.
Balancing efficiency with resilience is crucial for supply chains to withstand today's unpredictable disruptions.
Factors Sparking Supply Chain or Distribution Failure
A single event that disrupts a company’s supply chain even for just one day can cause shortages and production delays across continents and industries. There are a wide variety of incidents that can cause upheaval in a supply chain:
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Extreme Weather and Natural Catastrophes
Wildfires in Los Angeles, back-to-back hurricanes in Florida, record heat in India, a typhoon in Vietnam, and flooding in Brazil, Spain and Bangladesh are some examples of climate- and weather-related events in 2024 that had profound effects on supply chains.1
In January 2024, for example, a historic drought crippled shipping along the Panama Canal, where trade flows — normally accounting for around 5 percent of global maritime trade — dropped 32 percent.
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Collapse of Key Infrastructure
Because so many commodities and other supplies are transported globally, any increases in costs or closures of key ports and shipping channels (including the loss of a single bridge in Baltimore) cause wide-ranging effects: shortages, production delays and inflation.2
For example, container ship transit in the Red Sea (a channel for 12 percent of global trade) was slashed by 67 percent due to ongoing conflict in the Middle East, forcing shippers to add about 7,000 miles to their routes in some cases, raising fuel use and carbon emissions and sending shipping costs and transit times skyrocketing. 3
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Shortages and Strikes
Supply chains face a broad array of other threats, including commodity shortages, cyber attacks and financial instability among key suppliers.4 Long-term strikes by U.S. longshore and dock workers, which could have cost the U.S. economy $5 billion per day, were averted after a just few days in October 2024. But port workers did go on strike in Germany in 2024, as did rail workers in Canada.5
In the transport sector, the European Union is experiencing a shortage of critical raw materials, including cobalt, lithium and nickel, threatening electric vehicle manufacturing and decarbonization goals.6 In the pharmaceutical industry, drug shortages remain acute, with more than 275 active shortages reported in the U.S. as of late 2024, prompting legislative action to safeguard patient care and public health.7
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An Emerging and Accelerating Risk
Supply chain disruptions are increasingly diverse, extending beyond physical damage events to affect supply availability and costs. For example, recent geopolitical events such as trade wars and tariffs have had a considerable impact on supply chain decisions. Additionally, insolvency cases are rising in sectors such as transportation and logistics, while systemic cyber events can disable supplier channels and critical infrastructure.
Moreover, the International Labour Organization reported that in 2022, 50 million people were living in modern slavery globally, with 28 million in forced labor, often concealed within international supply chains. This situation poses significant environmental, social and governance risks. Organizations must recognize this broader exposure and anticipate potential triggers of supplier disruption to effectively prepare and manage them.
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Overreliance on a Single Supplier
Organizations often focus on their largest suppliers, but a single small supplier or a niche component can expose a disproportionate vulnerability. In one example, Hurricane Helene halted activities at a small mine in North Carolina that supplies 70 to 90 percent of high-purity quartz — a key semiconductor input.
Losses and preparedness
Despite nearly two-thirds of respondents stating they are prepared for supply chain or distribution failure, the risk continues to materialize — with more than a quarter reporting losses in the past year.
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28%
of respondents suffered a loss from this risk in the 12 months prior to the survey.
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61%
of respondents stated their organizations had set up a plan to respond to this risk.
Profiling and Quantification is Key to Mitigating Supply Chain Risk
Enhance Supply Chain Transparency and Visibility
Advanced analytics and predictive risk intelligence are essential to enable real-time monitoring and decision making that can spot pain points and potential risks as well as strengthen supply chains.
Quantify and Manage Financial Risks
Data-driven risk modeling allows organizations to forecast potential losses; prioritize the contracts, customers and products most in need of protection; and invest in risk mitigation accordingly. Only 12 percent of respondents have quantified their supply chain risk, but if you don't understand the exposure, how can you make appropriate risk management decisions?
Balance Efficiency with Flexibility and Resilience
While efficiency remains a priority, organizations must also build flexibility into their operations to adapt to shifting trade flows, regulatory changes and geopolitical uncertainties. This can include re-engineering supply chains, diversifying supplier bases and investing in technology to enhance the ability to pivot quickly in response to disruptions.
Invest in Innovation, Workforce Development and Continuous Improvement
The stakes are high: Supply chain resilience depends on professionals who can blend technical expertise in artificial intelligence, data analytics and automation with strategic problem-solving and risk management skills. Investing in ongoing workforce development and fostering digital fluency are not optional; they are essential.
Prioritize Enterprise-Wide Collaboration
Breaking down silos across a business allows stakeholders to operate from a shared set of data and risk assessments, coordinate their responses and unify their decision making.
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Supply chain or distribution failure has fallen one rank compared to our previous survey.
Case Study
Finding the Needle in the Haystack: A Single Point of Failure in a Massive Supply Chain
Aon ran a study for an automotive manufacturer with more than 18,000 suppliers and identified a small but critical supplier of a chemical used in the paint shop. If that supplier had failed, the entire production process would have ground to a halt, with no redundancy or contingency. By gaining this crucial insight the company was able to diversify their supplier base to ensure business continuity.
This illustrates why companies should apply a risk lens when considering which of their suppliers are most critical. Focusing too narrowly on supplier relationships with the most significant spend increases the risk that single points of failure will be overlooked.
Why It Matters
As organizations navigate an era of heightened volatility, they must rethink their approach — prioritizing resilience, transparency and adaptability as well as efficiency. The stakes are high: Supply chain resilience has become a core determinant of business continuity, competitiveness and long-term success.
1 Marsall Terrill, “Measuring the supply chain impact of the LA fires,” ASU News, January 21, 2025, Deepanshu Mohan and Ankur Singh, “How Extreme Climatic Conditions are Disrupting India's Economy,” The Wire, January 14, 2025, Francesco Guarascio, Phuong Nguyen and Khanh Vu, “Factories in Vietnam's export hubs face weeks of disruption after typhoon,” Reuters, September 22, 2024, Carlos Caicedo, Chris Rogers and Rafael Amiel, “Floods in Brazil’s Rio Grande do Sul state disrupt supply chain,” S&P Global, June 4, 2024, Suman Naishadham and Emilio Morenatti, “A parched Spain has emerged from drought only to face floods,” AP News, March 26, 2025, Ruma Paul, “Twenty dead, 5 million affected in Bangladesh floods,” Reuters, August 26, 2024; Michael Billet
2 “Fed’s Barr: Tariffs to boost inflation, slow growth later this year,” CNBC, May 9, 2025, Jack Simpson, Phillip Inman and Jillian Ambrose, “Global supply chains are under pressure again. Will inflation start rising?,” The Guardian, October 2, 2024, McGregor McCance, “Supply Chains Explained: How They Work and Why Tariffs Can Strain Them,” The Darden Report, Mach 11, 2024.
3 Gokcay Balci, “Red Sea crisis: supply chain issues set to continue despite Gaza ceasefire,” The Conversation, January 30, 2025; Christine Murray, Oliver Telling and Shotaro Tani, “Gas and grain ships shun Panama Canal after drought disruption,” Financial Times, August 14, 2024.
4 Alaric Nightingale, “These Choke Points Pose Global Shipping’s Biggest Risks,” Bloomberg, May 23, 2024, Tim Freestone, “Analyzing the supply chain risks behind the top data breaches in 2024,” Supply Chain Management Review, November 4, 2024, Margi Van Gogh, Filipe Beato and Luna Rohland, “Why transport and supply chain ecosystems need to be cyber secured,” World Economic Forum, June 20, 2024, Umberto Cavallaro, “Commodities: A Market Under Geopolitical And Economic Pressure,” Forbes, April 11, 2025.
5 “Tentative Contract After Longshore Union Stops Hamburg Port Operations,” Maritime Executive, September 4, 2024, Rob Gillies and Josh Funk, “Canada’s freight trains will soon roll again after labor lockouts. Here’s what to know,” AP News, August 22, 2024.
6 “Europe’s raw material shortages threaten EV decarbonisation goals,” Euractiv, July 9, 2025.
7 “Kaine, Cotton, Spanberger, & Smith Introduce Bipartisan, Bicameral End Drug Shortages Act,” U.S Senator Tim Kaine, November 21, 2024.
General Disclaimer
This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.
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