To help the manufacturing industry build resilience and manage risks, Lockton shares the top 7 sector risks of concern to watch out for – hand-picked by our experts and clients.
Learn the business/insurance impacts to think about, understand how the most resilient manufacturers are responding and the top questions your peers are asking right now.
The top risks (each risk and response will vary by sub-sector), are:
1. Employee risks
What this means for manufacturers:
Labour shortages and attracting/retaining talent.
Contract labour costs increasing and availability still challenged.
Ongoing COVID-19 and related absences.
Change in technology and re-skilling employees.
Ageing workforce and the need for next-gen workers.
The ever-increasing cost of workers’ compensation and impact on bottom-line.
Worker to contract worker risk is increasing and insurance gap growing.
2. Supply chain risks
What this means for manufacturers:
Reliance on too few suppliers with no back up plan; supplier failures or stretched.
Vulnerable transport links (supply and customers), including truck/rail/air freight,freight forwarding, in-transit storage, cold storage and maintaining cold-chain integrity.
Geo-political risk e.g. Ukraine/port blockages, China embargoes.
Lack of space on cargo ships/shipping container shortages.
Semi-conductors – highlights global pinch points exist in certain ‘downstream’.
Pallet shortages.
Availability of key equipment/machines – increased lead times/delay.
Reputation risk due to unchecked supplier/customer Environmental, Social, Governance (ESG) failings.
3. Inflation risks
What this means for manufacturers:
Increasing costs of raw materials (exacerbated by transport/fuel costs, Ukraine conflict).
Equipment cost and lead time: new vehicle purchases (might be paying 20% more for forklifts/EPJ's versus 2 years ago) and must wait 18 months from date of order to delivery.
Financially vulnerable customers/suppliers.
Costs for utilities, labour, materials increasing.
Spiralling labour expense adding to the cost of production - inability to pass all expenses onto customers.
Under-insurance risks.
4. Business interruption risks
What this means for manufacturers:
Loss of profit following an insured property damage event.
Lead times on critical supplies taking longer to source/transport.
Additional costs incurred post-loss to maintain supply or continue to service customers.
5. Climate change risks
What this means for manufacturers:
Increased energy costs, particularly for heavy materials users (cement, steel, aluminium).
Increase in property-related hazards, including floods and bushfires.
Base load supply concerns.
Net zero strategies and disruption.
Need for a well-considered 'sense of purpose' statement and ESG strategies.
6. Reputational risks
What this means for manufacturers:
Product failure, defective/contaminated products and recalls.
Litigation.
Supply Chain risks, for instance customers both local and overseas (alternative, redundancies, or reliance on a few).
ESG concerns e.g. modern slavery.
Vulnerable ESG statements.
7. Technology transition risks
What this means for manufacturers:
New risks amidst transition to Operating Technology (OT).
Artificial Intelligence (AI).
Robotics.
Staff education on cyber security.
The Watchlist is packed with risk and insurance success stories, including:
How Lockton reduced active claims by more than 60% for an organisation.
How Lockton negotiated 90 days pre-shipment Trade Credit Insurance cover.
How manufacturers can manage the costs of under or over-insurance.
How Lockton delivered a 15% saving on Business Interruption Insurance premium.
How Lockton can plug gaps in traditional insurance programs.
Download Lockton’s Manufacturing Risk Watchlist
Click the download button (located on the right for desktop users and at the bottom for mobile users) and fill out the form to access the report.
