Supply chain disruptions continue to impact nearly every corner of commerce and remain firmly on the minds of global business leaders. Multiple elements are in play that could exasperate supply chain woes and increase vulnerabilities, including:
- Longer and more complex supply chains
- Just in Time vs. Just in Case supply chain philosophies
- Continued port congestion and lack of workers across supply chains
- More intense and frequent natural catastrophes
- Rising geopolitical and political violence risks
Some of the causes and the heightened concerns over supply chain vulnerability and resilience are due to COVID-19 -- a global disruption unseen in the past century. Supply chain disruptions due to the pandemic are well-documented and substantial. According to Aon’s COVID-19 Risk Management and Insurance Survey the largest percentage of disruption in the supply chain due to the pandemic was because of a drop in consumer demand (36 percent) followed by a quick surge in demand. The supply chain could not keep pace and continues to lag.
Climate change and its variety of connected perils have also had an impact on supply chains. Wildfires, floods and drought have disrupted the supply of everything from lumber to chocolate.1
Further, the consequences of the Russian invasion of Ukraine have impacted supply chains in a number of areas, especially the global food, agriculture and beverage sector, which was already under stress as the result of the COVID-19 pandemic.2
Increased cyber attacks have also caused broad disruptions in the supply chain. Ransomware attacks are threatening the shipping industry, which relies heavily on the interaction between a number of different digital systems, from ports and cities to individual ships and the companies that own them. Amid the growing global interconnectedness, business interruption is a major concern among business leaders surveyed in Aon’s 2021 Global Risk Management Survey, however, it is of top concern among leaders in Asia where COVID-19 has particularly exposed the fragility of global supply chains. Business interruption is set against the backdrop of many moving parts in the Asia Pacific region, from regulatory changes to international businesses moving manufacturing closer to their own markets.
This set of often-interconnected risks may result in supply chain concerns and vulnerabilities that continue to hamper businesses and consumers worldwide. In fact, Aon has identified complex supply chain risk as one of the big six risks facing businesses today, along with intellectual property, cyber, reputation damage, climate change and COVID-19.