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Supply chains are intricate networks and processes involved in the production and distribution of goods. The supply chains are increasingly vulnerable to disruptions from cyberattacks, natural disasters, accidents, labor strikes, software failures, export controls, tariffs, regulatory interventions and armed conflicts, leading to diminished revenues and profits and making insurance a critical component of an enterprise’s business strategy.
National policy and security
The reliability and security of supply chains are vital for business operations and critical to national security. In 2012, the U.S. Department of Homeland Security adopted a National Strategy to address supply chain vulnerabilities and to foster resilience in the global supply chain system. The European Union has made similar enhancements through initiatives such as the Critical Raw Materials Act and the Chips Act.
Cyberattacks and supply chain vulnerabilities
The May 2021 DarkSide attack on the Colonial Pipeline, which led to significant disruptions and financial losses, underscores the importance of insurance – particularly cyber insurance – in mitigating such risks.
- Insurance is essential for mitigating risks in complex and vulnerable global supply chains
- Contingent business interruption, cyber risk, political risk and other insurance policies offer tailored coverage for different supply chain disruptions
- Regular review and comprehensive understanding of insurance policies are crucial for ensuring adequate protection against supply chain risks