resilience. the key to 2015. - fm global touchpoints · 9. manufacturing risk – adapting for...

SPECIAL REPORT

Resilience. The key to 2015.

Sponsored by

In the last 12 months, Touchpoints has featured many articles from CIR, written

exclusively for FM Global. As companies prepare for 2015, this Special Report asks

“what are the main challenges that companies will face?” and “how can resilient

behaviours help?”.

In this report, we bring together ten key articles from 2014, with a new unpublished

article: “Are you on track for resilience in 2015?”.

This concise guide provides trends and debates around the world of risk

management, stressing the need for resilience in the year ahead.

Contents:Page

3. Are you on track for resilience in 2015?

4. Averting crisis: A roadmap for risk managers

5 Nanotechnologies: Small things, big business

6. Environmental damage and consequence

7. The Internet of Things in logistics

8. Leading through innovation

9. Manufacturing risk – adapting for resilience

10. Risk in the retail sector

11. Rethinking global risk

12. Going for green

[ ]Resilience

15

april 2013cirmagazine.com

An interruption or failure in the supply

chain can have far-reaching impacts,

regardless of the type and size of an

organisation. Reduced operational capability,

product recall, unmet contractual obligations,

lost market share and the potential resultant

reputational damage are among the most

common of these risks. But in most of today’s

global enterprises, protecting the continuity and

resilience of these increasingly complex chains

is a major task.

In terms of complexity, the manufacturing

sector has the greatest challenge. Risks

including logistics, component availability,

transportation and regulatory challenges all

require constant attention. Other, external

factors are worthy of consideration, including the

knock-on effect of natural disaster, illustrated,

for instance, by the intricate interconnectivity

of risks where production on one side of the

world can be halted because of issues relating

to component supply from the other side of the

world. Major car manufacturers, for instance,

have factories around the globe, but if they

depend on parts or components from within

an area affected by an incident, the inability

to procure these may significantly disrupt

production.

The risk consequences for the manufacturing

sector of a changing legal and commercial reality

further underline the supply chain imperative.

Regulatory proceedings and investigations

continue to make an impact in a crowded field

of potential litigation. In fact, a recent report

carried out by international law firm Fulbright &

Jaworski cites the manufacturing sector as the

third most at risk from investigation, only after

the healthcare and energy sectors.

Other risks with a part to play in destabilising

the supply chain include those from the

economic, social or political spheres, as is

evidenced through the consequences of global

economic fragility and political instability or

social unrest. Energy risks also fall into this

category, where it relates to power continuity.

Supply chain continuity is also exposed to such

threats as cyber risk or other IT failure. Making

the link, therefore, with wider risk and business

continuity planning is vital for a comprehensive

attempt at achieving resilience.

With the majority of world trade now moved

as marine cargo, a significant portion of global

supply chains are at risk from port closure and

diversion, or customs-related delays. Before

entering into international relationships, it is

worth creating a contract risk management

strategy for dealing with any potential disputes,

which may include product liability and recall

issues, as well as recovery disputes.

An emphasis on just-in-time deliveries only

exacerbates this issue. Some organisations find

near-sourcing a solution to this problem, which

cuts transport costs and emissions, avoids

foreign-exchange fluctuations and facilitates

face-to-face meetings with suppliers.

The supply chain has become a truly global

affair. As Helen Devery, head of the corporate

risks team at Berrymans Lace Mawer LLP

explains: “Consider the diverse countries

which formed part of the A380 Airbus supply

chain and the network created by that feat

of manufacturing. It is clear that businesses

increasingly rely on global relationships. This

can create great opportunities for them to trade

in a worldwide market and to equally seek

competitive products for their own supply chain.

It can also create liabilities that are complicated

by different legal jurisdictions and approaches to

risk control.”

Finding suitable ways to protect the network

of businesses that are most critical to your own

is not always straightforward. Several industry

organisations have developed methods for

supply chain risk management including SCOR

and ISO certifications.

Without assurance in the supply chain,

businesses are operating with unacceptable

levels of uncertainty. Further, a limited resilience

and capacity to bounce back following an

incident serves to amplify the risk and prolong

downtime. Chain reactions through the

supply chain are indeed unpredictable and

not directly proportional to the size of the

original trigger.

Effective supply chain management

helps the business to understand its risks

and gain the benefits associated with

standardisation and operational efficiency.

Further, when a critical supplier fails, the

impact is greatly reduced and often completely

eliminated, through the businesses ability to

see gaps and prioritise accordingly. Two-way

information sharing with supply chain partners

will further bolster network risk visibility. A

multi-tier scenario approach to planning, with

its greater levels of complexity, will also unearth

otherwise hidden problems. And in the spirit

of continuity, effective reporting

to upper management will help

maintain the resource needed

to keep effective supply chain

management at the top of the

board agenda.

Making the linksManaging the risk of supply chain interruption is vital, and no more so than in the manufacturing sector

sponsored by

News & Analysis l [ ]

FM-Global-touchpointsApril2013.indd 3 27/03/2013 15:38:14

News & Analysis l Editorial l Features ]Resilience


[ ]

The retail environment is changing faster

than ever before. A combination of

factors behind these changes makes

for a challenging risk environment. In the UK,

the retail sector is the largest private sector

employer, employing three million workers.

Figures from the British Retail Consortium

(BRC) put total sales in the UK retail sector

alone at £321bn for 2013, which is 20 per cent

of the country’s GDP. £32bn of those sales

were online.

Technology risksThe way retailers are using technology is

evolving rapidly and profoundly changing the

business, with digital innovations increasing

the customer experience while streamlining

business operations. Retail brands are

increasingly learning how to leverage digital tools

to drive sales. Retailers can also use mobile

technologies and hypertargeting through big

data and social media to leverage a burgeoning

quantity of behavioural and attitudinal data on

digital users to better target their advertising

campaigns. Other innovations include

geofencing, in-store wifi and augmented reality.

These and other technologies allow brands

unprecedented market penetration, enabling

them to keep ahead of the competition and

exceed customer expectations.

Alongside the opportunities offered to the

sector through technology, retailers must

face the new digital risk reality and embrace

the proportionate IT security to protect the

customer base, avoid litigation and penalties,

and guard market share and reputation. The

last few months alone have seen a number

of well known retailers suffering some of the

most severe data breaches ever seen in the

sector. In January 2014 it was revealed that

US retailer Target suffered a breach where

the data of an estimated 70 million customers

was compromised. In the UK, Tesco recently

announced a breach affecting around 2,000 of

its loyalty card customers.

An increase in online shopping numbers

also creates systemic risks in other areas of

the business. This can be seen in the rise of

transportation incidents, as more deliveries

mean a corresponding increase in the risk of

accidents and potential litigation.

Bricks and mortarFor all the buzz around technology in retail, the

traditional high street risks are ever present. In a

global context, the retail sector was significantly

affected by terrorist attacks throughout the

course of 2013, with over a third of attacks

globally impacting on the sector, according to

figures from Aon Risk Solutions.

Following the events of September 2013

in the Westgate shopping centre in Nairobi,

premiums for terrorism cover increased by

between 10 and 20 per cent as demand for

the cover surpassed uptake of insurance

against political violence. Terrorism remains

a variable threat in the Eurasia region, with

Russia and Turkey the most affected throughout

2013. Japan, Mozambique and Bangladesh

have also seen increases with the latter

witnessing civil unrest over 70 days of strikes

and accompanying protests, particularly against

low wages and poor working conditions in the

garments industry

Adding to the issues affecting the retail

sector, the impact of volatile weather on profits

is increasing around the world - and not just

from extreme events. Even minor fluctuations

in expected weather can impact on business

performance. Weather risk management

solutions and supply chain diversification can

both play a part in addressing this risk. Another

hedge against sudden unavailability of inputs

is to maintain an excess inventory of finished

products.

Emerging risksA proactive approach to anticipating future

challenges will red flag any emerging risks.

These include, in the fields of science and

technology, emerging risks associated with the

potential toxicity of nanomaterials and the impact

of 3D printing. Meanwhile, regulatory risks

including import and export should never be far

from the radar. In the UK, the government has

pledged to reform business rates by 2017. The

BRC is expected to publish its recommendations

for the overhaul of the business rates system,

which may include such radical

proposals as the abolition of the

current system and an increase

in VAT – which would affect high-

street retailers and e-commerce

businesses alike.

sponsored by

Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply

FM-Global.indd 3 3/19/2014 1:39:17 PM

3

Resilience

january 2015cirmagazine.com

News & Analysis l Editorial l Features[ ]

sponsored by

Over the last twelve months, CIR’s Special

Reports for Touchpoints have covered

a wide variety of business risks and

opportunities, and made the case for proactive risk

mitigation across a number of risk areas – among

them technology risk (the Internet of Things,

nanotechnologies, cyber risks) and climate and

environment risk (natural hazard management,

catastrophe insurance, greening). Together and

separately, these issues continue to directly

influence the way organisations operate – for

better and for worse.

As organisations navigate through the coming

year, aptitudes and attitudes towards resilience will

be a major defining factor of their success.

So, what should organisations be looking to

achieve in 2015? How can they learn from what

we know to be resilient behaviours and activi-

ties? What does resilience even look like? Well,

according to FM Global’s benchmarking tool and

repository on nations’ resilience to supply chain

disruption, which has been designed to help

organisations make more informed decisions when

it comes to supply chain risk, resilience looks

snowy, mountainous and has a capital situated at

about 59.95° N, 10.75° E. Perhaps unsurprisingly,

resilience appears to look like Norway.

Interestingly, Norway has also been named the

most prosperous country in the world for the sixth

year running by the annual Legatum Prosperity

Index – which rates countries on how they perform

in areas such as economics, health, education and

freedom – underlining the broad marriage between

resilience and success. To boot, this oil-rich coun-

try had even proved that being resilient needn’t

mean sacrificing a commitment to being green.

In FM Global’s Resilience Index, contributors of

resilience to supply chain disruption include such

factors as economic (GDP per capita, political

risk, oil intensity – resilience to price and supply);

risk quality (natural hazards, quality of natural

hazard risk management and quality of fire risk

management); and the supply chain itself (how

well the country controls corruption, infrastructure

quality – perceptions of general infrastructure:

transport, telephone, energy; and local supplier

quality).

To return to Norway, this country currently

ranks as the country most resilient to supply chain

disruption. It is followed by Switzerland, which also

benefits from a high score in its ability to control

corruption and low exposure to political risk, its

extensive and efficient infrastructure and the

quality of its local suppliers. The success across

these three factors gives Switzerland a resilience

ranking brought down only slightly by its exposure

to natural hazards.

At the opposite end of the scale, high exposure

to natural hazards, has contributed to the Domini-

can Republic being the least resilient country to

supply chain disruption (despite a lower exposure

to political risk). Closely behind them, with similar

characteristics are Bolivia and Venezuela. Looking

ahead, real improvements in resilience will only be

made possible when, concurrently, economic and

supply chain factors are themselves ameliorated.

Some of the factors considered by the Resil-

ience Index are of course, not directly within an

organisation’s individual ability to control, but their

impacts may well be. What the index sets out to

do is to consistently measure countries’ and ter-

ritories resilience and vulnerability to supply chain

disruption. Companies seeking to understand and

establish resilient behaviours and processes

can use that analysis to help prioritise their risk

management and investment efforts over the

coming year – and turn this knowledge into action.

The scale of flooding across Europe last winter,

for instance, has left many rightly concerned about

a repeat performance. And while the weather

cannot be controlled, there is much businesses

can do to address the risk. An FM Global study of

the effects of flood damage on businesses over

a 10-year period showed that companies with no

response plan, or an ineffective plan, suffered

an average gross loss of £2.1 million as a result

of flooding. For those that did have an effective

response plan it was £600,000, a 71 per cent

reduction, and a fitting return on investment.

One of the key emerging characteristics of re-

silient thinking is indeed that of proportionality, and

this is reflected throughout this analysis. Resilience

is the organisation’s ability to resist the shock or

negative impact in the face of a number of factors

– all of which are closely bound, and each with an

impact on the other.

Understanding this, and

establishing the appropriate

behaviours to counteract

it, will define the resilient

organisation throughout 2015

and beyond.

Are you on track for resilience in 2015?As organisations navigate through the coming year, aptitudes and attitudes towards resilience will be a major defining factor of their success. So, what should organisations be looking to achieve in 2015?



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

4

Incident management

november 2014cirmagazine.com


sponsored by

It is widely accepted that companies with a

culture of resilience are better placed to avoid

potential crises and are likely to be more

successful in the long term. Recognising this

strategic priority, companies seeking to establish

resilience should aim to understand objectives

and priorities when it comes to incident and crisis

management.

A crisis ready organisation is one that can

reference and stick to core identified principles,

aligned with risks as identified in the risk register.

As Paul Robertson, director of business resilience

at PwC notes, “A crisis management response is

defined by your ability to understand your audience

and stakeholders and then reflect your values

in those relationships”. Robertson says among

the challenges around organisational leadership

is making sure that whatever you are capable

of doing is linked to the organisation’s defined

purpose, objectives and values. “Within any crisis

response situation, you can do a great many

things mechanically, but if they are not reflective

of the expectations of stakeholders or your values,

then you have to ask yourself if you are really

delivering what is needed.” This, he states, is the

basis of your relationship with your stakeholders,

and in some cases makes the difference between

continued business or otherwise.

Events themselves may take any number of

forms – externally driven, internally driven, and –

more often than not – operational incidents such

as IT issues, service failures – all of which can

grow into much more significant events given

the right environment. A report published by

the Business Continuity Institute and the British

Standards Institution suggests IT-related threats

are continuing to provide the greatest concern for

organisations, ranking above other threats such as

natural disasters, security incidents and industrial

disputes. Risk registers should also consider data

breach, adverse weather, interruption to utility

supply, fire, physical security incident, health and

safety incidents, acts of terrorism and new laws

or regulations. Further, the cyber threat has quite

fundamentally changed the way we must look

at incident, crisis and reputation management.

Organisations must therefore put in place plans

that recognise a world without cyber borders.

And while these operational risks are the most

common, there will always be the risk of the event

that arrives out of the blue – which, by their nature

have already developed into relatively severe

events by the time they come to light.

Learning from the successes and failures of

other organisations can make for quick gains when

searching for crisis instruction. In his book, Crisis,

Issues & Reputation Management, author Andrew

Griffin examines the challenging environment in

which crises and reputations are managed, and

analyses how incidents may be corralled so as to

avoid becoming crises. Indeed, Griffin maintains

that the reputation of an organisation influences

whom we buy from, work for, supply to and

invest in.

Some of the following incidents may, the author

points out, seem like “ancient history”, but many

have led to improvements within incident and crisis

management, helping to inform best practice today:

• Bhopal (getting to the scene of the incident);

• Piper Alpha (major incidents require media and

relative response capabilities);

• Exxon Valdez (if you don’t act, regulators and

politicians will);

• Swissair (families can forgive if you help them

remember);

• Pan Am (companies cannot be victims);

• Herald of Free Enterprise (never speculate);

• Deepwater Horizon (the spokesperson matters);

• British Midland (reputations can be built with a

good crisis response);

• Hudson River (crises need heroes);

• Texas City (crisis management is about actions

as well as words).

All of the above serve to demonstrate harsh

realities in a number of crises that need not

be repeated.

Establishing leaders to deal with incidents

and crises is central to success in incident

management. This year’s Crisis Management

standard (BS 11200) makes clear that crisis

management is a strategic issue that must be

owned and driven from the top. As maintenance

of plans occurs mostly at the management rather

than executive level, the standard has been

written to speak to both audiences. That

said, leadership must still continue to provide

the direction and vision of the overall goal.

The standard covers the core areas of crisis

management: core concepts and principles;

developing and building a capability, crisis

leadership and decision making, crisis

communications as well as training, exercising

and learning.

All these elements

can together help build a

capability to manage risks

with crisis potential and

manage and recover from

crises when they occur.

Averting crisis: A roadmap for risk managersIncidents and issues need careful strategic management if potential crises are to be avoided. In this article, we look at the steps risk managers can take to ensure their organisations can avert disaster



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

5

Nanotechnology

october 2014cirmagazine.com


sponsored by

Nanotechnology is going to be big

business. Set to revolutionise business

and industry – most notably in medicine,

food and energy production, nanotechnology is the

single largest R&D investment that governments

are focused on.

Nanotechnology involves the manipulation

of materials and the creation of structures and

systems at the scale of atoms and molecules

or the ‘nanoscale’. The properties and effects

of nanoscale particles and materials differ

significantly from larger particles of the same

chemical composition. These tiny ingredients

have the potential to make a vast and positive

impact on society, with the potential to enhance

environmental protection, boost industrial

competitiveness, and, from electronic equipment

and cars to cosmetics and textiles, increase

resource and energy efficiency of industrial

processes and products. Thus far, however,

relatively little has been documented about the

potential negative impacts on the environment

and human health.

But that’s not stemming the proliferation of

nanotechnology. According to the Woodrow

Wilson International Center for Scholars, foods

containing nanomaterials are rapidly entering the

market at a rate of three to four per week. The

number of nanofood and beverage products has

grown tenfold in the last six years. A report, Tiny

Ingredients: Big Risks, published in May 2014 by

Friends of the Earth examined the science and

the number of reported engineered nanomaterials

in our food supply chain. According to the report,

in 2008 there were eight food and beverage

products found to contain nano ingredients. Today,

that number stands at 94. This analysis is based

on information documented in the Woodrow

Wilson International Center for Scholars’ Project

on Emerging Technologies Consumer Products

Database.

The Friends of the Earth report cites roughly

200 transnational food companies as currently

investing in nanofood and nano packaging and

are on their way to commercialising products.

The nanofoods market is expected to grow to

US$20.4 billion by 2020. An increasingly large

body of peer-reviewed evidence indicates some

nanomaterials may harm human health and

the environment. Nanomaterials have unique

properties that offer many new opportunities

for food industry applications, such as potent

nutritional additives, stronger flavourings and

colourings, or antibacterial ingredients for food

packaging. However, these same properties may

also result in greater toxicity for humans and the

environment.

In the US today, a large number of food items

consumed on a daily basis already contain

nanomaterial ingredients. These include familiar

products such as processed and cream cheeses,

chocolate products, oils and cereal. Nanomaterials

are also increasingly being used to package and

preserve fresh fruit and vegetable products, which

could threaten the integrity of staple healthy foods.

Due to a lack of required labelling and disclosure,

the number of food and beverage products

containing undisclosed nanomaterials is likely

much greater.

In Europe, regulatory changes look set to

bring more clarity when it comes to labelling and

disclosure. Food and drinks companies in the EU

could face more consumer claims as a result of

new food labelling regulations coming into force

later this year, which are designed to make food

labelling easier for consumers to understand by

streamlining and simplifying the current legislation

on food and nutrition labelling into a single EU

regulation. Under the new legislation, all food

businesses will be required to provide allergy

information on food sold unpackaged in catering

outlets and shops. Existing legislation on labelling

will include changes regarding the inclusion of

novel ingredients including nanotechnology in

pre-packed foods. This could drive increased

product liability exposure for a wide range of

businesses involved in the food production and

distribution chain.

Change is afoot when it comes to

nanotechnology and liability. In the medical

sector in the US, over 10,000 cases have already

been filed nationwide claiming product liability for

a DePuy hip replacement, following allegations

of excessive corrosion that could shed toxic

nanoparticles into the patient’s body, among

other complaints. Now that nanoparticles have

been identified as a safety problem, one can

expect these lawsuits are likely to have a

knock-on effect across a variety of sectors,

as well as impacting insurance and regulation.

Key to the success of nanotech is research

and debate. The nanotechnology community

has already begun an earnest dialogue with the

business community, and

a growing body of study

is being developed to fully

understand the opportunities

and risks in this fascinating

and fast-developing science.

Nanotechnologies: Small things, big businessFrom small beginnings, nanotechnologies are fast making their presence felt. Benefiting from the opportunities presented by nanomaterials means being fully cognisant of the risks



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

6

Resilience

september 2014cirmagazine.com


sponsored by

Environmental risk is frequently found close

to the top of the risk management agenda,

with a growing number of companies

accepting the negative financial impact that

environmental risks can have on their bottom

lines. One of the reasons for this is the direct link

between environmental damage and the brand

damage that can occur in the event of an incident.

Then there is the potentially spiralling cost of fines

for environmental offences.

In the last few months, the UK has seen a

combination of Court of Appeal judgements

and a new sentencing guideline issued for

environmental offences, bringing with it new

and significantly greater levels of fines for such

offences, particularly for large companies.

In January 2014, a case involving a failure in

Sellafield’s nuclear segregation system involving

radioactive waste closed with the company being

fined £700,000. At the time, it was argued that the

level of fine was excessive, however the Court

of Appeal’s decision was upheld, reinforcing the

message that this is not an issue it takes lightly.

Since then, the UK Sentencing Council

issued definitive guidelines on the sentencing of

Environmental Offences, covering sentencing for

the unauthorised deposit of waste under Section

33 of the Environmental Protection Act 1990,

and illegal discharges to air, land and water. The

guidelines apply to all offences sentenced after 1

July 2014.

In terms of the impact that this latest change

to environmental law will have, that very much

depends on the size of the organisation in

question, and on the manner of the damage done.

A tariff divides company size into four categories:

micro – turnover less than £2m; small – turnover

between £2m and £10m; medium – turnover

between £10m to £50m; and large – turnover from

£50m. Culpability is divided into a further four

categories: deliberate, reckless, negligent and low/

no culpability, each with levels of seriousness.

By way of example, for a large company,

fines range from £7k for a low/no culpability

event to £3m for an incident that is deemed to be

deliberate. A very large company, whose turnover

greatly exceeds that of a company considered to

be large will be treated “proportionately” – a term

that is very open to interpretation, and thus poses

a degree of risk that is difficult to calculate.

Businesses in the UK are also increasingly

impacted by tougher regulation for environmental

offences from beyond its own shores. Under

Europe’s Environmental Liability Directive (ELD)

firms face civil sanctions for environmental

offences and any clean-up costs under the Polluter

Pays principle. And a recent European Parliament

decision to increase corporate transparency

has the potential to identify previously hidden

environmental risks, impact international climate

change negotiations and harmonise increasing

regulation by European Member States on

corporate reporting of non-financial information.

With potentially 6,000 European companies

affected, a number of organisations will soon

be required to include a statement in their

mainstream financial reports detailing their current

and foreseeable impacts on the environment.

A growth in public awareness surrounding

environmental issues, along with tougher

regulations and subsequent fines have put

environmental risk issues firmly in the spotlight.

The risk of brand damage and considerable

financial consequences represent two

compelling arguments for taking the

proportionate steps to

understand and assess the

complexities of environmental

risk regulation, and to

keep abreast of them as

they change.

Environmental damage and consequenceThe link between environmental damage and brand damage is irrefutable. Add to this the potentially spiralling cost of fines for environmental offences, and the case for proactive risk mitigation is made

In the UK the first systematic attempts to

control the polluting effects of the industrial

revolution were made by the Alkali Acts in

the 19th Century. Later legislation addressed

pollution of water and land. These laws to

control one problem have now become part of

complex laws which cover potentially the most

polluting industrial activities.

Since 1972 European environmental

legislation has increasingly shaped domestic

environmental laws. A series of single

issue directives were made but have

increasingly been replaced by “framework”

and “daughter” directives, which aim to

take a more integrated approach to

environmental protection.

Some UK environmental laws come from

international conventions and agreements,

seeking to regulate issues including climate

change, waste shipments and information

on participation in environmental decision

making, among others.

A guide to environmental laws

Source: The UK Environmental Law Association



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

7

Resilience

july 2014cirmagazine.com


sponsored by

Logistics has always been about connectivity.

But today, that connectivity is intelligent like

never before – and if it is not, it certainly

should be. Modern logistics encompasses all

the links in supply chain: transport, warehousing,

inventory, manufacturing, wholesale, retail and

after service – everything that facilitates the

movement of goods and more. The logistics

sector is vital to the global economy.

Today, logistics and supply chain are not just

concerned with the physical movement of goods,

but also with information flows – now a major

focus in the sector. To keep pace, it is essential

that logistics is flexible, and, increasingly, more

intelligent. Enter the Internet of Things.

The term Internet of Things, or IoT, was first

coined by Kevin Ashton while working at Procter &

Gamble in 1999 as a way to describe connectivity

between physical machines – or ‘things’ – via

the Internet/network. And, while this connectivity

of components has been in existence for some

time in the guise of pervasive computing, it is

only now that pace is gathering in the way that

it is examined as a business enabler. It is worth

noting, that at the time of coining the term IoT,

Ashton was working on RFID, or Radio Frequency

Identification (wireless scanning) for the supply

chain, a technology that has long been supporting

the flow of goods and one that could well be

considered a stepping stone to the IoT.

Falling technology costs and developments

in complementary fields including cloud and

mobile are contributing to an uptake of IoT in

the consumer space and organisations are

beginning to take notice as they seek to find ways

of using it to improve business resilience. The

aforementioned Mr Ashton is now working for

US-based electronics manufacturer Belkin, whose

WeMo suite of home automation IoT products for

the consumer market is gaining strength after its

launch in 2012.

With this hyper-connectivity, new opportunities

arise. The key benefits to the logistics sector are

in service feedback and increased cooperation.

IoT integrates all the parties in the supply chain,

helping to connect weak links in the chains to

achieve seamless connection. Each action of each

participant is therefore made more transparent,

making logistics service integrated and rapid,

improving resilience and helping to avoid business

interruption. This in turn can help drive down the

costs of industrial and commercial activities, at the

same time as improving product flow.

Increased connectivity also means increased

security risks – even more so when human

intervention is necessarily lessened. The broader

the connection, the broader the risk. Extrapolated

to business, the risks can seem severe. A hack

attack on a consumer’s TV is one thing; hacking

into a vehicle’s safety system quite another. And

then there is the issue of data privacy. According

to the Economist Intelligence Unit’s (EIU) Internet

of Things 2013 business index: A quiet revolution

gathers pace, lack of trust and concerns about

data privacy are said to be hampering the take up

of the IoT at least in the consumer market.

There is a lot that is not yet known about the

IoT. But that’s not stopping it. As take up gathers

pace in companies and services, challenges

will be faced when it comes to regulation and

standardisation. A lack of know-how and skills

when it comes to the IoT will also need to be

addressed. As it currently stands, the only learning

taking place is of the successes and failures

of those companies who have already adopted

the IoT and begun to integrate it into their

business processes.

At the government level, logistics is at the

heart of UK Prime Minster David Cameron’s 2014

pledge of £45m to help develop the IoT, referring

to it as the new revolution, and a development

that will help make transport more efficient. This is

on top of the UK’s recent pilot, led by its innovation

agency the Technology Strategy Board, whereby

a project to create a smart transport and logistics

ecosystem was developed. And this is only the

beginning.

Meanwhile, in the business community itself,

interest does not appear to be completely matched

with investment sums, this does look set to

change. The EIU’s report, which was conducted

across the globe, suggests that a staggering

96% of organisations polled expect to be

using IoT within the next three years. And so

with the strides made thus far, we seem on the

cusp of a step change in this use of technology,

and it seems clear that

those companies that fail

to get to grips with IoT now

will risk falling behind those

embracing the future in

digital logistics.

The Internet of Things in logisticsThere are still a great many unknowns when it comes to the Internet of Things. But it has arrived, and the logistics sector is uniquely placed to benefit from all it has to offer, as long as it is aware of the risks



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

8


june 2014cirmagazine.com


sponsored by

The need for innovation in business is

not new, but an increasingly complex

and uncertain world produces new and

sometimes exponentially different challenges when

it comes to risk management. Forward looking risk

management approaches require an acceptance

of the need for change – for constant horizon

scanning.

Energy risksAmbitious targets often call for radical steps. As

diminishing reserves signal the end of North Sea

oil, the world is beginning to adapt to a low-carbon

future based increasingly on renewable energy,

creating a new and significant market for second

and third-generation renewable power generation

plants and technology. Renewable projects

are inherently risky and increasingly complex,

employing new innovative technologies, and, in the

case of wind and wave power, locating power-

generating plants further and further offshore.

Innovative insurance is pivotal to the future of

this industry – for infrastructure providers and

power generators, to governments subsidising

renewables, and the public and third-parties when

things go wrong.

Information risksIn the field of information security, the need for

vigilance and adaptation is often close to the top

of the agenda – if not at the top, with high-profile

data loss or theft reported on a daily basis, and

with often serious consequences. Examples

of best practice can be used as a benchmark

against which to measure preparedness for this

increasingly relevant risk. One such example

can be seen in the UK Cabinet Office’s recently

introduced information security classification policy

describing how to classify information assets to

ensure they are appropriately protected. The policy

applies to all information that government collects,

stores, processes, generates or shares. It is hoped

that this layered approach to information security

may be emulated across the private sector,

encouraging a better understanding of the value

and importance of certain data.

Systemic risksCatastrophic risks are no more apparent than

when it comes to natural disaster. There are

countless examples in history where catastrophes

have affected lives and livelihoods on a grand

scale. What defines catastrophic risks today,

however, is their increasingly complex and

uncertain nature, which gives rise to a pattern of

consequences that are far more difficult to predict.

Today, natural disasters could conceivably trigger

risks in combination with new technologies – as

demonstrated by the meltdown at the Fukushima

nuclear power plant in Japan by the March 2011

tsunami.

In a few decades, the emerging sciences

of nanotechnology or synthetic biology could

render feasible the creation of real viruses in

home laboratories. The Global Agenda Council

on Catastrophic Risks says this could be as

straightforward as it currently is to create computer

viruses on a home computer. As bleak as this

sounds, however, there are ways to prevent the

related risks, or at least to mitigate the impacts.

Research and innovation is the vital component

to this. The GACCR is encouraging the public and

private sectors to work together to address these

risks, which may only be effective with a vision,

strategy and commitment to more extensive,

consistent and systematic approaches at the

country, regional and international levels.

The risk functionThe risk management function should seek where

possible to position itself at the very top of the

organisation, so that when it comes to strategic

planning, a risk approach may be embedded

throughout the organisation. The last five years

have seen many larger organisations create a role

for a chief risk officer, reporting directly to the top.

All companies are different, so what works for one

won’t necessarily work for the other. Establishing

a process that fits in terms of reporting, resource

and, not forgetting, culture, is an effective starting

point towards making this work.

The risk function must also strive to keep pace

with the skills required to respond to changing

business dynamics, maintain relevance, and keep

ahead of the competition.

Embedding this innovative

and forward looking approach

into the risk management

function builds resilience

throughout the organisation.

Leading through innovationSuccessful risk managers are constantly looking for new ways to manage risk. Looking at emerging developments and techniques in other sectors can provide useful inspiration in this endeavour



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

9


may 2014cirmagazine.com


sponsored by

Over the coming decades, an increasingly

wealthy, urban and interconnected world

will result in unprecedented opportunities

and significant threats to manufacturing

businesses.

Management of supplier risk has come into

sharp focus as a result of the downturn. A report

carried out by KPMG and the Economist Intel-

ligence Unit cites a tendency to avoid potential

problems altogether, or diversify around them,

rather than to understand the risk. This, the report

points out, can mean companies lose out on op-

portunities, such as tapping into the R&D potential

of China. The same report says the geography of

sourcing, a combination of the global and the local,

is in flux as companies consider the appropriate

link between customer and supply chain location.

The goals and metrics of the future manufac-

turer will change. They will be faster, more agile

and will have a greater degree of cross-region and

cross-sector collaboration. More innovative use of

buildings and space is also likely to be a feature of

tomorrow’s manufacturing business. Process and

practices will need to become more flexible, with

closer customer relationships and cross sector

R&D. Overall, the culture will be more open,

creative, networked and interactive, attracting

multi-skilled staff.

Technology will play a central role in driving

change in manufacturing. In its 2013 report, The

Future of Manufacturing: a new era of opportunity

and challenge for the UK, the Government Office

for Science anticipates that while some future

value will derive from completely unanticipated

breakthroughs, much can come from already

established or emerging technologies.

According to McKinsey & Company, the new

era of manufacturing will be marked by highly

agile, networked enterprises that use information

and analytics “as skilfully as they employ talent

and machinery to deliver products and services

to diverse global markets”. Among the most

important pervasive technologies are informa-

tion and communications technologies, sensors,

advanced and functional materials, biotechnology,

and sustainable/green technologies.

Secondary technologies for future manufactur-

ing will include big data and knowledge based

automation, the Internet of Things, advanced and

autonomous robotics, 3D printing (additive manu-

facturing), cloud computing, and mobile Internet.

Looking ahead to 2050, the same report

suggests the most likely convergence of environ-

mental trends, which will lead to manufacturing

activities becoming more sustainable and resilient.

Population growth, urbanisation and climate

change (affecting supply chains and emissions)

are among the mega-trends cited. An increase

in demand for water, energy, land and materials

will also play a significant part.

In terms of reactive trends, the pressure

to produce sustainable products will prompt

manufacturers, if it has not done so already,

to employ more efficient and resilient practices,

including minimised material inputs, waste

management, increased energy efficiency,

reduced water usage and improved efficiency

in land usage.

Further ahead, the report predicts that experi-

mentation with new systems will see products

being remanufactured, instead of becoming

waste, and new forms of value established that

associate products with sustainability.

Examples of innovation in sustainability can

already be seen across the sector. Caterpillar,

which manufactures construction and mining

equipment, diesel and natural gas engines,

industrial gas turbines and diesel-electric trains,

runs a remanufacturing programme that returns

products at the end of their lives to as-new

condition and seeks new ways to recycle and

reclaim materials that would once have gone

into landfills. And with its Service Exchange,

construction equipment

manufacturers JCB now

remanufactures around 1,650

parts to the same warranty

conditions as new parts

are offered.

The UK is a leading global manufacturer,

with a world class reputation in the

automotive, aerospace and pharmaceutical

sectors. Manufacturing employs over two

million people, contributes £140bn to the

UK’s economy each year, is responsible

for over 70% of UK R&D investment

and accounts for over 50% of exports.

Measures announced in the 2014 UK

Budget should only help businesses to

break into new, faster growing markets

and underpin an improvement in the UK’s

export performance. Source: CBI

Manufacturing risk – adapting for resilienceA changing world puts adaptation at the top of the agenda for tomorrow’s successful manufacturer – with technology and environment key focal points

Manufacturing: In figures



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

10



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

11


March 2014cirmagazine.com


Globalisation appears to have more

doubters than it does supporters.

It has widely been associated with

rising inequality between and within countries,

and allowing rich nations to move domestic

jobs overseas where labour is much cheaper.

Unsurprisingly, the recent global financial collapse

has done globalisation’s brand no favours.

On the other hand, the global exchange of

knowledge and trade around the world has

brought a great many scientific and technological

benefits, and has also enhanced the lives of many

from a cultural point of view. From an economic

standpoint, the United Nations even reckons that it

may contribute to the eradication of poverty in the

21st century. Others would argue it has done quite

the opposite already. Whether or not the benefits

outweigh the downsides, businesses cannot

afford to ignore globalisation and its impact on

organisational risks.

Globalisation is not a new phenomenon, but in

our now hyperconnected world, the confluence of

physical and virtual proximity has brought about

a new risk dynamic, one that shares none of the

characteristics of traditional risk boundaries, and

which transmits much further, more rapidly and

in previously unconsidered directions. This new

interconnected nature of the global marketplace

means the consequences of events spread

rapidly across sectors and borders, often with

second- or third-order impacts that are difficult,

and sometimes impossible to predict. The 2003

SARS outbreak, for instance, cost businesses

US$60bn – or about 2% of East Asian GDP. This

also serves to illustrate how the health and safety

of the workforce is such a complex challenge in

the globalised economy.

The World Health Organisation estimates

that more than 900 million international journeys

are undertaken every year. Global travel on this

scale exposes many people to a range of health

risks. And as some businesses shift towards

emerging and riskier markets, taking the right

precautions to protect people requires closer

attention. Many of these risks can be minimised

or mitigated with the appropriate risk response.

Establishing guidance for different jurisdictions

will need to account for local risks and concerns

at destination, as well as pre-trip planning to

identify hazards and threats to particular workers.

These may range from simple health checks

and immunisations to more complex analysis of

the risk of corporate kidnap. Large multinational

organisations may also need to have in place

processes to look after dependents, or, in the

case of large charities, for instance, networks of

volunteers – wherever they may be, and at any

given time.

Global networks have made next door

neighbours of organisations and departments

that are physically thousands of miles apart. The

IT portfolios of large, multinational organisations

have been expanding seemingly exponentially,

and despite the many clear benefits this brings,

it can mean an array of vulnerabilities when

it comes to data. Today, data loss brings with

it increasingly heavy penalties and global

organisations must find a way of streamlining

processes to deal with regulations such as the

forthcoming EU Data Protection regulation, under

which formal risk assessments must be carried

out, with all private organisations with over 250

staff, and some smaller high risk data businesses

required to appoint a data protection officer.

While implementation may not come into force

until early 2017, many large multinationals will

want to begin working on this now. Beyond duties

to protect personal data, vulnerable technology

means vulnerable intellectual property, distribution

networks or indeed any other factor that makes

up the enterprise network. In this environment,

physical events can have an impact far beyond its

origins.

In an increasingly connected global economy,

business and society will continue to be affected

by events, irrespective of location of the original

impact. The devastating Tohuku earthquake of

11 March 2011 had knock-on impacts for global

companies including Toyota and Sony, both of

which were forced to halt production. The way

supply chains are managed in the global market

can mean the difference between success

or failure for organisations that have put their

proverbial eggs in one basket.

At the heart of risk management in a

globalised business setting is the understanding

that one single incident can have many impacts

far and wide. Individual organisations

are beginning to measure the impact of

mismanagement of risk on reputations through

stock price fluctuations, and the relationship

is stark. As such, there is an increasing trend

towards an enterprise-wide approach to managing

risk, commonly with a chief risk officer reporting to

the chief executive officer, allowing for a

more holistic approach to

risks, the assessment of

which, in well run firms, is

now a formalised process

carried out annually, quarterly,

monthly or continuously.

sponsored by

Rethinking global riskAt the core of effective risk management in a globalised business setting is the understanding that incidents know no borders



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

12


February 2014cirmagazine.com


A mounting interest in green building

among politicians and the public is

hardly surprising, given the make-over

‘greening’ represents for governments and

corporate brands. But that’s not the only benefit

to going green. Lower operating costs due

to energy efficiency and water use, reduced

carbon footprint through lower greenhouse

gas emissions, potential tax benefits, improved

worker sustainability and better health among

staff are all cited among the upsides, on top

of that squeaky clean image that going green

begets.

Canadian organisation the British Columbia

Construction Association (BCCA) believes the

most significant influencer, however, in green

building in the commercial and industrial sector

could be government adoption of mandatory

compliance with third party rating systems

on public projects. Many governments are

increasingly including LEED (Leadership in

Energy and Environmental Design) or equivalent

requirements on new public construction and

providing other incentives to promote green

building. Probably the most recognised standard

in the green building space, the 14 year old

LEED framework, designed by the United States

Green Building Council, has even become law in

some US states.

Whatever the impetus – green is exactly

where the construction industry is going.

Research by analysts forecasts growth at

varying paces over the coming years, to as

much as 20% growth in demand for green

building materials alone to 2017, with exterior

products such as energy-efficient windows and

green roofing expected to make up the largest

part of this (Freedonia Research). And while the

UK lags behind the US when it comes to green

building, government efforts to address this are

rarely far from the headlines. The Confederation

of British Industry says green technology and

services currently deliver a trade surplus of

£5bn. By 2015, green growth is expected to

halve the UK’s trade deficit.

But it’s not easy being green. According to the

BCCA one of the largest risks on green projects

is a lack of awareness of potential claims related

to contractual agreements that expose a party

to more risk than initially anticipated. Use of the

wrong material or inadequate techniques may

also harm the green ideals of a project. This is

particularly important where sub-contractors

are in place. Education has an important role

to play in this regard, as more and more green

building projects get underway. Furthermore, if

steps required to attain green certification are

not known by all parties, certification may not

be attainable, and in some cases, mandates

regarding LEED certification and other

regulations can even give rise to various legal

liabilities. New, more environmentally-friendly

materials must also be thoroughly tested to

ensure they can withstand the impact of major

earthquakes, hurricanes and floods, for instance.

That said, green building projects and

techniques tend to represent a lower risk overall

than traditional buildings, and that’s good news

when it comes to insurance. Green buildings are

resilient buildings, and discounts are justified

by linking reduced emissions with damage

mitigating behaviour. Since the first commercial

green policy was offered almost a decade ago,

availability of green building insurance has

grown rapidly.

It is not hard to see why. Green buildings are

designed with the latest specifications for electric

systems, heating and air conditioning systems.

They go through rigid commissioning processes

and are highly efficient. Since commercial

property losses most frequently come from

electric fires, heating and air conditioning fires

and plumbing leaks, state of the art green

facilities are considered comparatively low-risk.

The World Bank Group sees specific

opportunities for green building in commercial

offices, healthcare, education buildings,

retail spaces, supermarkets and hotels, with

interventions including treatment and reuse

of waste water, efficient heating and cooling

equipment and insulation all to have a high

impact.

Green is going virtually everywhere. And

in doing so, a burgeoning market for products

and services is opening up. Looking ahead,

industry portal, Sustainablebusiness.com

sees the focus of the green building industry

changing from new buildings to greening

existing buildings, as well as

green buildings increasingly being

managed in the cloud, enabling

automation in the management

of facilities through wireless

controls.

sponsored by

Going for greenWith interest in green building rising fast and a burgeoning market for green services growing around it, what are the risks?



[ ]











were online.



























































garments industry











products.

















businesses alike.

sponsored by


FM-Global.indd 3 3/19/2014 1:39:17 PM

resilience. the key to 2015. - fm global touchpoints · 9. manufacturing risk – adapting for...

Documents