The global business landscape has seen significant transformation due to the ongoing pandemic. One of the most devastating impacts has been seen in the form of supply chain disruptions. With components and raw materials not reaching their destination on time, businesses, irrespective of their size and reach, are grappling with unprecedented disruptions in their operations. Amidst this scenario, one way businesses are trying to ward off the looming uncertainty is through insurance. Supply chain disruption insurance can provide businesses with the cushion of financial security, helping them continue their operations unaffected by the global logistics meltdown.
A survey by FM Global showed nearly 68% of senior financial executives have said that they will likely increase their supply chain resilience in the post-pandemic era. Many are considering insurance as part of this strategy. But how does one choose the right coverage? What factors should be taken into account before deciding on an insurance policy? The first thing to consider is the geographical location of your suppliers. If your supplier is based in a region frequently plagued by natural disasters, the risk of supply chain disruption is significantly higher. Hence, your insurance policy should provide comprehensive coverage for such eventualities.
Next, evaluate the reliability of your suppliers. Are they known for timely delivery? Have they faced financial problems or labor disputes? Understanding the risk associated with your supplier can help you negotiate a better coverage with your insurer. You should also consider the nature of your product. If you are dealing with perishable goods with a short shelf life, the risk of spoilage increases in the event of a supply chain breakdown. In such cases, a policy with coverage for spoilage costs can be beneficial.
Furthermore, pay attention to the policy's deductible, premium, and limit. It’s important that you understand these to ensure you aren’t underinsured or overpaying for coverage. While insurance may not completely eliminate the problem of supply chain disruption, it can significantly reduce the financial stress associated with it. In these challenging times, it serves as an essential safety net for businesses worldwide.
Protecting Your Business from Supply Chain Disruptions
