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Navigating the Supply Chain Crisis

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Two and a half years since COVID-19 emerged and set off a sea change in how we work and live worldwide, business leaders continue to grapple with the challenges it has created for the global supply chain. Extraordinary congestion at critical global ports, decreased availability of key raw materials and component parts, rising freight bills and an increasingly tight job market have all contributed to the need for companies to create an effective logistics risk management program. Such a program must focus on the detailed assessment of key risks to the supply chain and the creation of mitigation strategies that limit their impact on a company’s ability to satisfy its customers.

How Did We Get Here?

To better prepare an organization for the future, it is important to reflect on events in the past. Some of the critical issues that have contributed to the unparalleled supply chain pressure within the logistics world include:

  • Increasing reliance on foreign suppliers for key inputs, adding to the time it takes to secure goods and also leading to a diverse range of exposures that could impact customers
  • Greater dependence on ever more sophisticated components
  • Labor shortages impacting the transportation and port industries
  • Crumbling infrastructure, especially domestically, contributing to increased time and expense to move freight
  • The continued movement to just-in-time procurement, leading to challenges matching supply to demand as supply chains are strained
  • An increasingly sophisticated electronic network to plan, monitor and maintain the logistics chains, leading to increased vulnerability to cyberattacks

While these issues may have been the fuel, it is certainly the COVID-19 pandemic that was the spark for the current challenges facing the supply chain, as the pandemic affected the global supply chain in many ways. For example, reductions in production capacity overseas due to government quarantines left many components in shorter supply.

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Overseas port capacity was restricted because of quarantines and worker shortages due to illness. Already operating at its maximum after years of limited investment, United States port capacity became overtaxed and less efficient at moving product to final destinations. Additionally, increased consumer demand for foreign produced goods, such as home office equipment, clothing and furniture, further stressed global supply lines.

According to maritime research and consulting firm Drewry, these issues resulted in freight rates increasing by more than 100% year over year, transportation time increasing by almost 50%, and logistics professionals facing greater difficulty guaranteeing the ability to meet their company’s needs. Companies with logistics professionals who developed and implemented supply chain risk management strategies have likely experienced a limited impact in comparison to those without such processes in place.

It’s Not Over Yet

While the majority of the world is now emerging from the most dramatic parts of the unprecedented global shutdown and hope is on the horizon, significant threats remain that require vigilance and focus. This is best illustrated by the impact of the early 2022 lockdowns implemented in parts of China as part of the country’s zero-COVID strategy. With an export volume of more than trillion, what happens in China quickly ripples around the world and impacts every sector.
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From semi-conductors to resins, active pharmaceutical ingredients to petroleum products, China is a critical node in the supply chain of almost every consumer product. With major production and transportation hubs like Guangzhou and Shanghai implementing sweeping lockdowns, companies are once again feeling the pinch in reduced ability to source product and significantly expanded time lines for delivery.

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What Can Be Done?

Business leaders should consider several best practices to minimize disruption to their organization’s supply chain:

  1. Develop risk assessments on primary and secondary suppliers, determining the impact they could have on the company’s ability to produce product.
  2. Create a detailed mapping of critical suppliers that includes manufacturers and service providers, such as freight forwarders, in order to assess catastrophic risk potential.
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    Have multiple suppliers, preferably in multiple geographic areas, as sources of critical raw materials and components. This reduces reliance on any single supplier or oversized exposure to geographical catastrophe risk. For identified critical areas, create a business continuity plan that outlines the process to shift to another resource in a separate geographic area.
  3. Maintain increased inventory on hand versus reliance on “just-in-time” methods, increasing the ability to quickly match supply to customer demand.
  4. Invest in supply chain intelligence data and telematics to increase visibility on goods in transit, which will help business leaders identify a quick and effective response to catastrophes as they occur.
  5. Manage customer expectations in respect to delivery schedules. The old adage “Patience is a virtue” may never have been more apt.

Looking Ahead

Corporate executives now have a heightened understanding of the supply chain’s importance to a company’s bottom line, leaving logistics professionals uniquely positioned to gain investment in resources to help address emerging logistics and supply risks. By conducting regular risk assessments and developing risk mitigation strategies to address the exposure, business leaders can better position their company to limit the impact of supply chain challenges and create a stronger, more operationally resilient enterprise.

RISKWORLD 2022: Q&A with Opening Keynote Michael C. Bush

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RIMS RISKWORLD is just a few days away, kicking off in San Francisco on April 10. This year’s opening keynote will be delivered on Monday by Michael C. Bush, the CEO of Great Place to Work and author of A Great Place to Work for All: Better for Business, Better for People, Better for the World.

Bush recently sat down for an interview on the RIMScast podcast, discussing how the pandemic has redefined satisfaction in the workplace and the critical steps that risk professionals can take to increase equity and happiness in their organization. Download the RIMScast episode for Bush’s full interview and check out a preview of his April 11th keynote below:

What will you discuss in the keynote address at RISKWORLD?
Michael C. Bush: We’re going to talk about making a connection in a way that [makes] people, employees and clients feel they are cared for. Physical and mental health is a top priority now and risk professionals play a role because there is data and policy to consider. But, if you approach it correctly, it can lead to organizational success even during a pandemic or the Great Resignation.

How has the definition of happiness or satisfaction changed against the backdrop of the pandemic?
MB: Prior to the pandemic, we could talk about happiness, satisfaction, engagement and empowerment in one context. COVD has changed that. We were suddenly in a world where people felt like really nobody cared, because they were living a life where there was so much uncertainty. They didn’t know what they needed to do to protect themselves or their family members—physically and financially. This left huge voids because there was economic insecurity on top of it all. People had to watch their communities suffer as small businesses shut down one after another.

Great companies realized this was a time to care. Therefore, they became the one thing that their employees could rely on. In our interviews, we heard stories of companies sending employees necessities like toilet paper during shortages, making deliveries to their parents and other instances that were happening at a personal level. Those lucky employees realized their employers actually cared about them as people and not just as an employee, and that led to happiness. The only silver lining from the pandemic was that humanity has surfaced in a way that has connected us all.

How do you view resilience? 
MB: We all have tough days. When a person is under pressure but knows that they have support or someone or an organization that can relieve that pressure and enable them to bounce back, that’s resilience. It can eliminate burnout, but there’s a difference between burnout and being burnt out. And we’re going to discuss that difference at RISKWORLD.

Fans of language and communication—or those looking to sharpen their skills—will find some really strong takeaways from your take on active listening. Now that so many professionals depend on remote capabilities to work, how has your perception of active listening changed or evolved?
MB: I’ve become a more intense believer in active listening, especially over the last couple of years. It’s not just making eye contact and not just me repeating the last thing you said. Listening is really about caring. When you listen to a person in a deep way, it is the ultimate show of respect—and not doing it is equally disrespectful. If all I’m doing is waiting for someone’s mouth to stop moving to grab tidbits of what they said to make my point, that is not listening, that’s just a spring-loaded response.

When it comes to being remote, try to dial in and focus on the person who’s in front of you on the screen. Put down your mobile phone and stop multitasking—chatting, posting and “liking” things on social media. 

Listening, in the way I’m talking about, takes practice. It involves emptying your mind and being humble enough to do that and not holding on to your own point of view so tightly. When your mind is open, you start asking questions and learning starts. Through that exchange, something unusual and great happens: people feel safe and will start to say more. You might help someone solve their problem, they might help you, or you might identify a new risk altogether.

What Employers Need to Know About Federal COVID-19 Vaccine Mandates

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In an effort to combat the COVID-19 virus and its subsequent variants, the Biden administration has instituted three important mandates that employers should be aware of as they may impact their business. First, the Emergency Temporary Standard (ETS), issued by the Occupational Health and Safety Administration (OSHA), requires that all employers with 100+ employees mandate vaccination or weekly testing. The second mandate involves federal workers and contractors and requires them to obtain a vaccination without any option for weekly testing. The final mandate was issued by the Centers for Medicare and Medicaid Services (CMS), and requires vaccination of all healthcare workers at CMS-covered facilities.

OSHA’s Emergency Temporary Standard

The mandate that has the most wide-ranging impact is Occupational Health and Safety Administration’s (OSHA) Emergency Temporary Standard (ETS) that calls for employers with 100 or more employees to either require employees to obtain a COVID-19 vaccination or to prove compliance with a weekly-testing program. This ETS is expected to affect over 80 million employees. 

On December 17, the Sixth Circuit Court of Appeals lifted the stay placed on OSHA’s ETS issued by the Fifth Circuit in November. The court held that OSHA does have statutory authority to mandate national vaccines and/or testing for employers with more than 100 employees. Specifically, it outlined that because COVID-19 is a virus that causes bodily harm, OSHA was well within its administrative authority to regulate the health and safety of employees. 

Since the Sixth Circuit’s decision to dissolve the stay, OSHA announced that it will not be issuing citations for noncompliance with the ETS requirements until January 10 and the testing requirements will not be enforced until February 9 with the caveat that the employer must make good faith efforts to come into compliance as soon as possible.

After this ruling by the Sixth Circuit, eight groups challenged the OSHA vaccine mandate and filed emergency applications with the U.S. Supreme Court asking it to stay the mandate again until the case can be heard in the highest court. On December 20, the Supreme Court requested a response from the federal government by December 30. And, on December 22, in an almost unprecedented move, the Supreme Court ordered oral argument on these emergency applications, which will take place on January 7.

Despite the fact that the validity of the ETS is now squarely before the Supreme Court, employers should still operate as if the ETS will go into immediate effect. OSHA has implemented new deadlines to reflect the current status of the ETS.

By January 10, employers should:

  • Track employee vaccination status
  • Create a database detailing vaccination information for each employee
  • Require unvaccinated employees to wear a mask
  • Provide paid time off for employees to get vaccinated and recover

As of February 9, 2022, employers must also require unvaccinated employees must start testing for COVID weekly. Self-administered or self-read tests would not comply. Employers must observe or use a proctor and have employees tested on site, or at a recognized testing facility.

The Mandate for Federal Employees and Contractors

The second mandate stems from President Biden’s executive order that requires most federal employees or contractors to get vaccinated. This mandate does not have a testing option.

On December 7, the U.S. District Court for the Southern Section of Georgia granted a preliminary injunction to temporarily halt the enforcement of the Biden’s administration’s vaccine mandate for federal contractors.The court found that the administration had overstepped the bounds of it authority under the Federal Property and Administrative Services Act 40 U.S.C. 101 et. seq. The injunction effectively prohibits enforcement of the federal contractor vaccine mandate in all 50 states and any territory of the United States. However, on December 17, the Eleventh Circuit, denied the government’s motion to stay. This effectively upheld the injunction. The court found that the government had failed to show that it “would be irreparably harmed absent a stay.”

The CMS Mandate

The third mandate is an interim file rule of the Centers for Medicare and Medicaid Services (CMS), which requires vaccination of all healthcare workers at CMS-covered facilities throughout the United States. The CMS mandate is currently enjoined by court order in 25 states and continues in full effect in 25 other states. After the ruling by the Fifth Circuit in November, however, CMS suspended implementation and enforcement of the mandate pending resolution of the challenges before the Supreme Court.

RIMS Risk Forum India 2021: Building Resilience As COVID, Cyberrisk Top Business Risks

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An increasingly key theme year over year, resilience is at the root of the latest Excellence in Risk Management India report from Marsh and RIMS—and the RIMS Risk Forum India 2021 virtual event, where the report was officially released today. In the second year of the COVID-19 pandemic, risk professionals in India reported acute short- and long-term concerns about the interconnected risks of COVID-19 cases, global economic recession, and surging cyberrisks amid shifts in work arrangements.

In addition to the death of more than 5 million people in India, the pandemic has taken a considerable economic toll on the region. “According to the Organization for Economic Co-operation and Development (OECD), India’s economy contracted by close to 8% in 2020, while the world’s economy contracted by 3.5%,” the report noted. “Despite the OECD’s projections for economic expansion—both in India and globally—in 2021 and 2022, the potential for a prolonged global recession remains a concern for organizations in India.

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Previously one of the top risks for India-based risk professionals before COVID-19, cyberrisk has also increased significantly with the pandemic and the shift to remote work. “The shift to a remote workforce necessitated by sweeping lockdowns to stem the spread of the pandemic is widely seen as having increased cyberrisk,” Marsh and RIMS noted. “The Indian Computer Emergency Response Team (CERT-In) data indicated that cyberattacks in India rose by 300% in 2020, according to news reports. And cyber risk remained elevated in 2021, with more than 600,000 cybersecurity incidents reported in the first six months of the year alone, according to CERT.”

The continuing pandemic, resulting fallout, and ever-growing cyberrisk have presented the biggest risks for organizations in India in 2021, and the survey indicates that local risk professionals expect these to dominate the agenda for businesses in the year to come.

Despite the considerable concern, few respondents said their company is fully prepared for the continued fallout from COVID-19 or future pandemics. Asked to rate their organization’s preparedness from 1 to 5 (not prepared to fully prepared, respectively), the majority of India-based risk professionals ranked their organization a 3, and only 10% said they are fully prepared. While cyberrisk has been a top threat for longer, preparation is not much better for the threat—only a quarter of Indian companies said they are fully prepared for a cyberattack. This is particularly concerning as “some extent of remote work is expected to remain, leading to concerns of increased cyberattacks due to unsecured home networks,” Marsh said in a press release.

According to the report, this underscores the imperative to develop robust risk management strategies for both current and emerging risks and to focus on building resilience. Marsh identified four “common behaviors among companies that are on the path to becoming more resilient”: anticipating risk, connecting risk management to business strategy, avoiding gaps in the perception of preparedness, and measuring relevant data. Marsh and RIMS explained these further, defining key pillars that have set successful businesses apart, and potentially also offering considerations for other organizations to develop more mature risk management programs:

  • Anticipation: Resilient companies expect the unexpected. They have crisis management plans in place, but they also dig deeper, look farther ahead. Consider that during the pandemic even organizations with thorough business continuity plans struggled. Why? Many of them didn’t fully anticipate the widespread, long-lasting damage a pandemic could create.
  • Integration: Another key behavior among resilient organizations is to fully integrate risk management with operations and strategy. Doing so increases the ability to develop effective responses. Most organizations do not connect resilience planning with their long-term investment strategy. Those that do make the connection are on the path to better mitigating financial exposure, reputational damage, business interruption, and other losses.
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  • Preparedness: On the journey to resilience, it’s important to develop an accurate perception of an organization’s preparedness. A false sense of security can halt an organization in its tracks. Companies often overestimate how quickly and effectively they will be able to respond to and recover from a given risk.
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  • Measurement: There is no shortage of data and analytics in today’s business environment. But consistently applying metrics can be a stumbling block. Many companies fail to conduct a high rate of modeling and forecasting even on risks they see as important. And among the companies that do so, most only model in select areas.

Marsh and RIMS recommended that organizations in India focus on resilience heading into 2022 and beyond. “Resilience means being able to absorb the impact from a range of emerging risks and depends in large part on having robust risk management strategies in place,” the report explained. “This includes anticipating risk, connecting risk management to business strategy, ensuring your organization’s perception of preparedness doesn’t lead to a false sense of security, and measuring relevant data.”

Respondents largely indicated that their organization planned to increase investment in risk management, with 55% saying they expect increased resources, 27% expecting investment to stay the same, and only 4% expecting a decrease. This could be a critical differentiator in navigating COVID-19 recovery and other emerging risks in 2022. Indeed, 42% cited budget at the most critical barrier to understanding the impact of emerging risks on risk management.

Among the takeaways from the report, Marsh and RIMS urged organizations to invest in preparedness. “Look beyond pandemic as you develop a risk management strategy that is prepared to respond to any number of emerging risks,” the report said. “For example, shifting work patterns have intensified an already escalating cyber risk landscape that calls for a range of responses, from scenario planning to financial quantification.”

In addition to a panel on the Excellence in Risk Management India report, the RIMS Risk Forum India 2021 virtual event includes a number of sessions that address resilience challenges and opportunities for risk professionals in India. The program includes keynote addresses by Ajay Srinivasan, chief executive officer at Aditya Birla Capital Limited (ABCL), and Dr. Soumya Kanti Ghosh, group chief economic advisor at the State Bank of India, as well as education sessions like “Cyber Risk Management: A Priority for a Resilient Economy,” “Climate Risk and Your Path to Resilience,” “What COVID-19 Has Taught Us About ESG Risks and Why Risk Management Needs to Change,” and “Breaking the Chain: How Understanding Business Interruption Exposures Can Mean Supply Chain Resilience.”

The RIMS Risk Forum India 2021 virtual event continues tomorrow, December 4, and sessions will also be available for on-demand viewing for the next 60 days. Registration can be found here: https://www.rims.org/events/rf/india-forum-2021