An interruption of business operations can result in major (financial) damage and, in extreme cases, even lead to the bankruptcy of an organisation. However, companies in the manufacturing industry are far from always aware of the risks and potential damage. Partly because situations and risks can change as a result of, for instance, geopolitical and technological developments. An adequate risk inventory offers a solution, explain Risk Consultants Waldo Imthorn and Wesley Stolzenbach. Both work at VLC & Partners, a personal advisor in risk management, absenteeism, pension and private insurance.
Visibility into risks and the potential damage is lacking in many cases
"The damage can potentially be very large and impactful. For example, through loss of turnover or higher costs due to having to find alternative suppliers, for example. However, think also of the loss of customers, image damage and a deterioration of your competitive position due to not being able to fulfil obligations. It can even pose a direct threat to your survival and lead to bankruptcy," Stolzenbach explains.
Imthorn: "We see in practice that problems quickly spiral out of control and companies enter a negative spiral. This brings production and supply to a standstill, which also brings revenue streams to a halt. As a result, companies can no longer innovate and fall further and further behind competitors. As the problems continue, they find it increasingly difficult to catch up."
From fire and explosions to cybercrime and supply problems
All kinds of risks can jeopardise business continuity. "Fire and explosions are well-known examples. However, all kinds of other factors can also lead to significant problems." Think of cybercrime, with ransomware and DDoS attacks being common examples.
Systems of parties in the manufacturing industry are increasingly connected to those of suppliers and customers. The interdependence and/or connectedness this creates carries risks. IT problems at an external party can therefore also lead to problems internally and jeopardise business continuity. It is important to understand the risks of outsourcing.
Mapping risks
Identifying risks requires an understanding of the total chain, from suppliers to customers. "In doing so, you bring into focus the weaknesses in the chain. For example, what is the dependence on a specific location? Are there fall-back options? This applies not only to production, but certainly also to stocks and deliveries of important goods and semi-finished products. In addition, to what extent is the organisation dependent on critical machine lines or components? On the buyer's side, it is also important to pay attention to the quality and solvency of debtors," Stolzenbach says.
In his role, Imthorn supports clients through discussions, which are both strategic and operational in nature. "Among other things, VLC & Partners maps the organisation's goals, identifies uncertainties and sets out what an organisation can do about them. We also call this a 'DOD conversation'," Imthorn explains. "Through such a conversation, we challenge the client to think about certain things."
A Business Impact Analysis (BIA) can also provide valuable insights. It consists of several steps:
- An on-site inspection and interview(s) about the risks.
- Preparing a report with the findings and assessment of risks.
- An assessment of reporting, identified risks and level of prevention.
- Writing an action plan with support from a (Technical) Risk Consultant from VLC & Partners.
Mitigating and insuring risks
The measures companies can take to cover risks vary from one organisation to another. "A common measure is effective contract management, where you scrutinise all contracts. For example, have your contract terms been checked by your legal department or external legal counsel? In addition, do you declare them applicable to every agreement?" explains Imthorn.
Also consider reducing dependence on individual suppliers and customers, including through diversification. For example, if a company is 50 per cent dependent on one large customer, cancelling this contract could lead to major problems. Stolzenbach: "Risks you cannot or do not wish to bear financially can be insured under certain conditions, something in which we, as a full-service insurance broker and risk manager, naturally support you."
Who is VLC & Partners?
VLC & Partners is a personal adviser specialising in risk management, absence management, pensions and private insurance. The specialist helps companies to identify and analyse risks using a sector-specific approach. This is followed by the implementation of measures: mitigating, transferring, accepting or avoiding the risks. The full-service insurance broker and risk manager also assists clients with credit and contract management. Where necessary, the adviser develops a personalised, tailor-made insurance programme and manages this on the client’s behalf from start to finish. VLC & Partners states that it has the capacity to offer clients the best possible service, whilst remaining small enough to provide a personalised approach. In this way, the organisation aims to offer clients the best of both worlds.
VLC & Partners
Assess, prevent, insure.
www.vlc-partners.nl
