Risk Management for the Manufacturing Industry
No one has escaped the past 18 months unscathed. The manufacturing industry is no exception.
Material and staff shortages have halted the growth of the industry. While confidence in the UK economy “fell off a cliff” during the third national lockdown.
The cost of commercial insurance has drastically increased. Manufacturing is among the top sectors relying on credit to pay for insurance, having seen one of the highest increases in premiums last year.
Suffice to say, the industry has faced its share of challenges. As businesses strive to recover, the importance of effective risk management must be acknowledged and acted upon.
Here are some of the key risks facing the manufacturing industry in the final quarter of 2021 and moving forwards into 2022 and beyond.
Cyber Security
In June, food processing company JBS paid $11m to a cybercrime syndicate that had targeted them with ransomware and disrupted their supply chain. Cybercrime and data breaches are on the rise, with 39% of UK businesses reporting cyber attacks in the last 12 months.
Manufacturers need to be wary of cyber risks, putting in place robust risk management strategies and investing in cyber insurance. For those who offer e-commerce, direct to consumer sales, this is even more vital as stricter regulations around protecting customer information are enforced. The pandemic saw a wave of manufacturers moving to e-commerce, many of whom won’t have effective risk management against cyber threats.
Business Interruption
Local and national lockdowns have constrained manufacturers, causing issues up and down the supply chain. With many put in place with little notice, companies have been left scrambling to adapt. Faced with empty order books, unpaid bills and uncertainty about the future.
According to a report by MAKE UK, 35% of manufacturers consider lockdowns their biggest concern over the next 12 months. While there are currently no plans for future lockdowns, we all know how quickly things can change. Manufacturers need to plan ahead – with strategies and policies in place to cover losses in such events.
Stephen Phipson, director of MAKE UK, stressed the need for a detailed plan of action going forward by the government. With targeted support and delivering confidence and stability. He said, “we must ensure that our great manufacturers can survive the coming challenges and be in a position to help drive the recovery when it comes.”
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Supply Chain Disruption
A severe shortage in delivery drivers has disrupted supply chains across the UK and worldwide. Supermarkets are seeing empty shelves and consumers are growing concerned about Christmas. The lack of HGV drivers is a real cause for concern for manufacturers. In the aftermath of Brexit, supply chains are already set to become more complex as EU trade is disrupted, access rights to the EU market change and it takes longer to move goods across borders. And while the government has introduced temporary visas for more HGV drivers, manufacturers must invest their efforts in strengthening their supply chains. Identifying weak links and potential liabilities will help protect businesses in the long term.
Alongside new and emerging risks, manufacturers still face ongoing concerns, such as regulatory challenges, labour shortages, product liability and more.
Insurance coverage is key to any risk management strategy. According to a survey by Premium Credit, in 2020, nine percent of firms suffered property damage and were unable to make a claim due to lacking sufficient insurance.
Getting the right coverage for your company will give you peace of mind when it comes to risk. For expert advice around risk management in the manufacturing sector, speak to [broker_name] in [broker_county] on [broker_phone].
