Artificial intelligence offers big improvement in supply chain risk management

Earlier this year, Zurich Insurance announced that it had entered a strategic agreement with riskmethods GmbH, a Munich-based company that uses artificial intelligence and big data to identify and manage supply chain risk worldwide. This provides Zurich’s commercial customers with an exciting new tool to help manage a complex and rapidly rising corporate risk. The new service has initially been made available to customers in Europe, with plans to expand to countries across Zurich’s operations in the US, Latin America and Asia-Pacific. Commercial Risk Europe’s Adrian Ladbury asked Marco Rossi, Zurich’s strategy execution director of commercial insurance, what the new strategic agreement adds for corporate risk managers and how such services can help them contribute more in this critical area.

Adrian Ladbury [AL]: What is Zurich Supply Chain Risk Management Services? Is this a consulting service provided directly to risk managers? How can risk managers take advantage of the service?

Marco Rossi [MR]: Zurich Supply Chain Risk Management Services is a new, innovative proposition, resulting from a strategic agreement between Zurich and riskmethods, a global, award-winning market leader in supply chain risk management. Zurich Supply Chain Risk Management Services combines riskmethods’ artificial intelligence-based technology with Zurich’s risk engineering expertise and insurance capabilities, to help existing customers identify, assess, mitigate and transfer their supply chain risk. The riskmethods solution automates and accelerates supply chain risk detection through real-time monitoring and risk profiling. This automatic monitoring of the health of entire supply chains is an essential element of the proposition in today’s economy, in which business continuity is critical to drive shareholder value. Although currently only available on a standalone basis to existing Zurich customers, we are planning to offer the solution more broadly.

[AL]: Who is it aimed at and what services do you offer? How much does it cost?

[MR]: Zurich Supply Chain Risk Management Services was launched in the first quarter of this year and is offered to all Zurich commercial customers, at a price proportional to the turnover in scope. We believe it is particularly suited to mid-sized and large companies from industries with relatively complex supply networks. The service covers all stages of the typical risk management cycle:

• Risk identification: This is done through riskmethods’ Risk Radar™, which digitalises the end-to-end supply network on an interactive world map, delivers actionable risk scorecards and notifies users with timely alerts on new and evolving threats.
• Risk assessment: This is carried out through riskmethods’ Impact Analyzer™ and Zurich risk engineering tools such as Zurich Risk Advisor, a self-risk-assessment tool that provides an easy way to assess suppliers’ criticality by category and enables customers to decrease the magnitude of risk impact to their business.
• Risk mitigation: This is done through riskmethods Action Planner™ and risk engineering services and expertise. This helps develop mitigation plans and prevention strategies that target the root causes of risk, streamlining actions with a standardised process.

[AL]: Why did Zurich team up with riskmethods? Why not do it yourselves?

[MR]: At Zurich, we are committed to supporting our customers in continuously finding the best solutions and technologies to manage their risks in a holistic manner. We recognise that in some cases such risk management solutions must rely on external companies that own proprietary, outstanding technologies. This is the case for Zurich Supply Chain Risk Management Services that leverages riskmethods’ artificial intelligence-based solution and expertise in the supply chain space. Riskmethods serves more than 12,000 users in over 130 global enterprises and its promise to customers is simple: it will make their business more resilient. The solution enables customers to be more risk-aware, react faster and manage risk more proactively than ever before.

[AL]: How exactly does the riskmethods solution work? How is AI used to identify and measure a company’s supply chain risk? How is this better than companies’ in-house analysis?

[MR]: Riskmethods analyses information from millions of data sources to identify new and emerging supply chain threats. This real-time big data monitoring results in millions of documents and pieces of information flowing into riskmethods, which is processed and checked for relevant events with potential to impact supply chains. Artificial intelligence then identifies and eliminates duplicate information from the analysis. Deep learning algorithms then rate the remaining information for relevancy. How does it know what’s relevant? Because riskmethods has been training it for years. Risk research analysts provide feedback on the data provided and, based on this training, the artificial intelligence understands how to determine relevancy itself. In the last step before sending an alert, riskmethods’ Risk Research enhances the alert with additional information such as impact zones.

Such a proposition would be simply impossible to deliver without the support of artificial intelligence. Based on an estimate Zurich and riskmethods made, about 45‚000 full time employees would be required to read global top publications and updates 24/7, to identify risk signals just for 500 suppliers.

[AL]: What kind of alerts are provided about risks impacting a company’s supply chain? Where does this information come from and how can accuracy be verified?

[MR]: Customers receive alerts via email and as a mobile push notification. These notifications contain all information about the event, including the potentially affected risk objects – such as suppliers, seaports and warehouses – located in the area of impact. Alerts are automatically updated with the most recent developments on the situation and mapped to an indicator within the riskmethods risk scorecard. The risk scorecard, comprised of more than 100 risk indicators, enables individual weighting to customise the sensitivity and monitoring scope to customer-specific requirements.

In addition to monitoring millions of unstructured online documents, riskmethods leverages specialised data sources and solutions for specific risk topics including financial ratings, sanction control, sustainability and compliance and currency exchange. Such specialised content partners feed risk insights into ‘The riskmethods Solution’ to make it the best source for information about supply chain threats. The combined insights from leading data sources with AI-driven active monitoring in riskmethods’ Risk Radar includes the following risk areas:

• Supplier risks (compliance, financial stability, etc)
• Location risks (strikes, natural disasters, etc)
• Country risks (geopolitical risks, sanctions, etc).

The artificial intelligence engine has been powered with more than six years of feedback amounting to millions of trained datasets, ensuring the delivery of relevant information only.

[AL]: What is an impact score on suppliers and what is impact profiling? How are ‘what if’ scenarios actually carried out?

[MR]: The riskmethods Impact Analyzer adds impact dimensions for better understanding of total risk exposure by giving customers an easy way to assess the criticality of their supply base at the category level. Out-of-the-box and fully configurable impact parameters (such as degree of substitutability, availability of alternative suppliers) and impact volumes (for example, margin or revenue at risk or spend volume) provision the impact profile. The result is an impact score, a qualitative grading, informing the customer of the criticality of the supplier. This visualisation to criticalities and dependencies in the supply chain enriches threat notifications. By changing impact parameters on the-fly, customers can understand how specific parameters influence the suppliers’ criticality to the business. For example, if the availability of alternative suppliers changes from 0 to 1 for a specific category, customers can understand how the risk exposure changes accordingly.

[AL]: What kind of business continuity plans does Zurich offer, including impact from climate change? Is this mainly for upper-middle-market companies that do not have a BCI manager or do you offer it as support to larger corporates too?

[MR]: Zurich is well equipped to support any organisation in the development of business continuity plans, although our main targets are upper-end mid-market corporates as larger organisations tend to have dedicated business continuity managers and hence their own expertise. Our business continuity Strategic Risk Practice supports our customers as they develop bespoke business continuity plans through workshops and meetings, including wider aspects of business continuity like policy development, exercising, training and awareness.

A good business continuity management plan recognises the key threats to an organisation and considers the impact it would have on its day-to-day operations. Climate change in itself would not be planned for, however the impact of potential events linked to such phenomenon as windstorms, flooding events and the like are definitely considered, and it could be argued that the likelihood of such events is on the increase. The impacts of such events could include denial of access to buildings, loss of utilities, impact on supply chain, availability of workforce and more.

Organisational resilience, of which business continuity management is an integral part, is about the ability to anticipate, plan and respond to both incremental change and sudden disruption. The risk of climate change is certainly an area to be considered as part of the wider organisational resilience thinking.

Zurich is a key partner of this year’s Commercial Risk Supply Chain Risk Management conference taking place on 25 November in London. We have again teamed up with Airmic and the Business Continuity Institute, as well as a group of supply chain risk management and transfer leaders, to help our readers work out how to best identify, measure, manage and transfer this critical risk. Attendance for the risk community is free and you can secure your complimentary registration at: www.commercialriskonline.com/events/list