Supply chain resilience should top corporate agendas, warns Swiss Re

The ripple effects of natural disasters, less-resilient supply chains and the repercussions of underfunded health systems have been identified as key emerging risks facing the insurance sector, business and society, according to new research published by Swiss Re.

Listing 16 emerging risks in its latest Sonar report and their potential impact on the insurance market, Swiss Re said while weather-related natural catastrophes are increasing in frequency and severity and causing widespread property damage, it is the cascading effects of such events that should concern buyers, supply chains and their insurers.

For example, wildfires can impact water supply by contaminating or restricting access to water sources. Similarly, floods can damage energy grids and disrupt transport networks, leading to halts in production lines and other forms of interruption.

“If critical infrastructure and supply chains are affected, the accumulation of damage can be significant,” states the report.

Supply chains are another emerging risk brought into focus in the report. While the impact of supply chain disruption was felt by many insurers and companies alike during the Covid-19 pandemic, attention has now shifted back to immediate cost savings rather than investing in resilience, states the report.

This is concerning given the more volatile geopolitical landscape, increased frequency of extreme weather events and heightened cyber and technology risks that have all helped to weaken the security of global supply lines, Swiss Re says.

“Given the current situation and the negative outlook on these risk drivers, supply chain resilience should be at the top of companies’ agendas,” the report says.

“If risks accumulate or coincide with an already stressed supply chain, the economic fallout could be significant.”

Produced against a backdrop of multiple interconnected crises and macro-risks such as climate change, economic uncertainty and geopolitical turmoil, the report also looks at the wider implications of a compromised healthcare sector – delayed or inadequate care contributes to higher morbidity and mortality, which in turn leads to health-related absenteeism and understaffing.

“Underfunding of healthcare systems and the impacts thereof are a concern across low-, middle- and high-income countries,” the report says.

“We live in a world characterised by interconnected crises, which in turn can give rise to new risks,” said Patrick Raaflaub, Swiss Re group chief risk officer.

“For (re)insurers, it is key to anticipate trends and understand how major global issues such as climate change, economic uncertainty or geopolitical turmoil could impact not only the industry but also society as a whole.”