Capturing 2019 Manufacturing Opportunity: How Better Risk Management Can Strengthen Your Game

Capturing 2019 Manufacturing Opportunity: How Better Risk Management Can Strengthen Your Game

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The business climate for middle-market manufacturers ($100 million to $3 billion in revenue) is growing steadily – presenting new opportunities, fresh markets and different ways of operating. That means your exposures are growing, too – with expanded financial, competitive, safety and cybersecurity risks, along with challenges in talent and workforce development. Recognizing, understanding and managing those risks can free up resources and position you as a winner in this bold new world.

Our friends at Chubb got together with the National Center for The Middle Market and The Ohio State University to research what the best-performing manufacturers are doing to capitalize on these new opportunities while mitigating the risks. Here’s a high-level summary of their findings.

INSIGHT 1: Increasingly intense competition driven by globalization and consolidation

The majority of those surveyed say the business environment is more competitive today than it was five years ago. And that’s true for both original equipment manufacturers and component part manufacturers. Consolidation of customers, competitor firms and suppliers, combined with new entrants and globalization are among the causes, and they’re putting tremendous pressure on costs.
Risk: Globalization, in particular, presents new risks. Is your business covered for the increased exposure of overseas travel or owned and leased facilities in global markets?

INSIGHT 2: Greater interdependence of relationships with customers and suppliers

The fastest-growing manufacturers are strengthening relationships with both suppliers and customers more than their slower-growing peers. And the majority believe their role in the supply chain has become increasingly important, as just-in-time inventory management and tightening timelines make hitting deadlines more critical than ever. Relationships with third-party logistics providers, IT and financial services are more integrated, too.

Risk: As collaboration increases, so does the amount of data exchanged among the partners – escalating the potential for a cyberattack. Yet cyber insurance isn’t on everyone’s radar. A solid cyber risk strategy, including risk engineering and cyber insurance, can help manufacturers quickly address an expensive, reputation-damaging breach – or even lower the risk of having one in the first place.

INSIGHT 3: Product and service mix changes
Many manufacturers are responding to the competition by adding revenue-boosting value- added services, such as installation, maintenance, financing and consulting. They’re also increasingly making smart, connected devices. These changes require new business models, a different talent mix and multiple new capabilities.

Risk: The risk spotlight for this insight shines on meeting customer standards for these newly integrated products and services. Failing to do so could result in financial injury. Strong warranties and contractual remedies are available, but they can’t make up for the lost revenue and reputational damage of a product or service failure. This is where errors and omissions insurance comes in.

INSIGHT 4: Rapidly changing technology on the factory floor and in processes

Technology advancements don’t only affect products and services; they’re completely transforming the manufacturing process, allowing for greater efficiency and customization. The study found that the fastest growers are placing greater importance on a variety of advanced manufacturing techniques, and those that embrace technologies most effectively will have an edge going forward.

Risk: A host of new risks accompanies the convergence of operational technologies, information technologies and the internet of things. That’s why it’s important to work with a broker who has deep experience and can help you get out ahead of emerging threats.

INSIGHT 5: Talent management issues compound every other challenge

More than half the companies in the study say talent is a big issue. Finding people with the right skills in this changed – and always changing – environment is tough. Automation, an aging workforce and the lack of people with vocational or basic skills contribute to the problem. Executives are responding by trying to increase the labor pool through outreach to colleges, technical schools and economic development organizations. They’re also offering more competitive pay and benefits, plus training, as they work on growing from within.

Risk: Here’s another area where your broker can help you with integrated HR and benefits solutions that strengthen your recruiting and retention efforts.

The Chubb report concludes that most successful manufacturers are energized by the rapidly changing environment. They understand the need to manage the risks that come with the new revenue opportunities. And the most successful ones recognize that the rewards are worth it.

The more your broker understands your business, the better risk management advice you’ll get. After all, that’s what makes them an advisor, not just a vendor.

By Tanner Smith, Commercial Risk Advisor, Commercial Insurance

See Also:

9 Ways To Reduce Your Insurance Risk

Drug Testing In 2019: OSHA’s Latest Guidance And Medical Marijuana Tips

Risk Management: How To Catch Complaints And Violations Before They Occur

How To Hire Smart In A Tough Labor Market

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