German risk managers turn focus to supply chain bottlenecks

The focus of the recent Ferma Talks event on resilience was naturally on the Covid-19 pandemic, cyber and natural catastrophes. But the increasingly worrying topic of supply chain also featured regularly throughout the two days, and GVNW members in particular need to turn their attention to this crucial area as the German economy is more vulnerable to supply-chain shocks than most. In interview with Commercial Risk before the event, Ferma president Dirk Wegener, whose day job is head of insurance at Deutsche Bank, said that, in his personal view, supply chain is certainly up the risk agenda currently for German and European risk and insurance managers. “Overall, we have learned lessons about vulnerability of corporations during the last two years and one major concern is supply chain. Apart from the overall impact of the pandemic, we have also had recent events such as the blockage of the Suez Canal, which have accelerated concerns about supply chains. This is a major lesson from the pandemic,” said Mr Wegener, the first German president of Ferma, who has agreed to continue in the role for another two years. “The survey that Ferma recently published with McKinsey showed that driving the importance of resilience within organisations is one of the major outcomes of the pandemic. Corporations are now putting resilience at the centre of their organisations. The strengthening, modification and reorganisation of supply chains is one example of this,” continued Mr Wegener. The strains placed on global supply chains in recent times are perhaps more pronounced in Germany than other European nations, because its economy is both export-driven and reliant on raw materials from around the world. Recent figures from the Federal Statistics Office showed that German industrial output dropped by far more than expected in August because of supply chain disruptions, which are holding back growth. German industrial output fell by 4% in the month, after an increase of 1.3% in July. "Manufacturers continue to report production constraints due to supply shortages of intermediate products," the office said in a statement. In mid-September, a survey by the German engineering association VDMA found that the majority of German mechanical engineering companies are facing serious supply-chain problems and believe that production will be hit as a result during the rest of this year. VDMA said that some 81% of mechanical engineering companies reported impairments in their supply chains, especially electronic components. Two thirds of the companies surveyed suffered from logistics and transport problems. “That is significantly more than even at the peak of the pandemic in mid-April 2020," VDMA chief economist Ralph Wiechers told news agency Reuters. In late September, the gloomy news from VDMA was confirmed by influential German thinktank the ifo Institute. The ifo Business Climate Index fell from 99.6 points in August (seasonally adjusted) to 98.8 points in September. This was the third consecutive fall. “Companies were less satisfied with their current business. They were also more sceptical about the coming months. Problems in the procurement of raw materials and intermediate products are putting the brakes on the German economy. Manufacturing is experiencing a bottleneck recession,” stated the institute.

German risk managers turn focus to supply chain bottlenecks

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