Protect clients against supply chain risk

Heat waves put pressure on power grids, resulting in temporary outages and business interruption.

Though the heat wave that hit central and eastern Canada last week has finally ended, the summer is far from over. This type of extreme heat puts pressure on power grids, which can result in temporary outages, and according to Marsh this affects residential and business customers.

The firm has revealed the following steps should be taken to protect your clients supply chain.

  • Identify supplies and suppliers in the areas likely to be affected by power outages.
  • Determine the extent of your reliance on these supplies and suppliers, their value/importance to your manufacturing or service delivery process, and the extent to which any delays might affect your ability to deliver products or services to market.
  • Review any alternative sourcing arrangements and/or identify new suppliers if such capacity is needed and then engage in discussions with regards to actual or contingent sourcing needs.

It is also important to review your client’s loss control and security guidelines to ensure protection against damage to property and equipment from power outages, which can result in operational disruptions, stated Marsh.

  • Determine the criticality of the facility to ongoing operations and if alternative production or service sites are available.
  • Assign responsibility to a plant manager or other operations executives for maintaining and disseminating information about planned reductions in service or power outages.
  • Review the required shutdown times of all equipment in the facility and determine how such timing can be accommodated in relation to planned reductions in service or power outages.
  • Review security measures at the facility, especially human to electronic monitoring ratios to determine if additional human presence may be required to protect the facility during any reductions in service or power outages.
  • If the facility must run on generator power, review your fire safety protocols to ensure safe operation will continue.

Also, the following policy areas should be reviewed, according to Marsh.

  • Waiting Period: Most service interruption coverage requires a waiting period, that is to say the service must be interrupted for a minimum number of hours before coverage begins to respond. You should also review if the waiting period acts as a qualifier and, after the period of time has elapsed, a dollar deductible applies, or does the waiting period itself act as the deductible.
  • Notice to the Utility: Many policies require that the insured give notice to the utility of the interruption. If this requirement exists, ensure that it is documented as part of your claim file.
  • Overhead Transmission and Distribution Lines: Many policies exclude losses arising from overhead lines. As soon as possible and keeping safety in mind, identify and document the true nature of your service interruption, including specific type of equipment damaged, cause of the damage, and distance from your premises.
  • Distance Limitations: Many service interruption coverage grants have limitations that the cause of loss must be within X miles or feet of the premises, so it is important to document that information early on in the claim process.

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