Page 27 - Risk Management Bulletin Jan- Mar 2022

RMAI BULLETIN JANUARY - MARCH 2022

hurricanes, earthquakes, wildfires or floods) both relationships. Companies should review their existing
disrupt business operations. Whether the damages are insurance policies to find out whether any losses they
physical in the case of natural disasters or nonphysical incur relating to COVID-19 can be covered under
as in the case of cyber, the financial losses stemming existing terms or whether they need to adjust their
from such interruptions can be significant. coverage for additional protection.

Considerations: 9. Impact on Supply Chain
Leaders need to identify areas of vulnerability from The Risk:
external forces that could disrupt operations and Governments around the world have begun to take
extent of potential losses, as well as the probability of
measures that limit the movement of goods and
an occurrence. Organizations should consider proactive people across borders. Restrictions imposed by the
steps (including risk engineering, risk financing and
Chinese government, for example, have included
change management) to handle business interruption
quarantine mandates and factory shutdowns across
risks. the country. As China is the factory of the world,
supply chains are deeply affected.
8. Impact on Contract Compliance
Considerations:
The Risk:
If management believes there is a risk of disruption to
Companies are experiencing an impact on sales,
their supply chains, they should take the following
production and supply chain, among others, as a result
steps, among others, to mitigate the potential
of COVID-19-related issues from business
consequences:
interruptions. These impacts have a cascading effect
a. Understand the behavior of disruptive models
on the ability to meet contractual obligations.
applied to the supply chain and establish the point
in time at which such disruption is located.
Considerations:
b. Consider re-prioritizing the production line to
Companies should consult their legal advisors and
respond to market impacts associated with the
review their contracts to determine what, if any,
threat, increasing safety stock levels, and
contractual obligations may be impacted and the rights
stockpiling essential supplies and resources.
and remedies they have as a result of the delayed
performance of contracts. c. Determine which vendors may be most severely
impacted and if alternative vendors can provide a
Companies should also take (and document) solution to meet business needs.
reasonable steps to mitigate the impact of COVID-19.
d. Pre-qualify alternative domestic or international
If companies cannot fulfill their contractual obligations,
suppliers and outsourced vendors in case primary
they may need to quantify the amount of financial suppliers can no longer provide support.
damage and the impact on their long-term business
e. Formulate contingency measures, give first
response and anticipate possible failures in the
supply chain. For example, examine the capacity
of other suppliers in other geographical areas,
change the production mix and plan for new
delivery methods to reach customers.

Conclusion
Although they are often unique, emerging risks can be
identified, evaluated and monitored, and response
plans can be implemented when they occur. Emerging
risk identification and assessment creates a
competitive advantage, helps "future proof" longer-

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