Nick Wildgoose 8 March 2012 BCI Workshop DELETE THIS TEXT AND PUT COMPANY LOGO IN THIS WHITE SPACE Understanding Risk within your Supply Chain SC1(V1)Jul/05/10GC/ZCA

© Zurich Insurance 2 Due Diligence Self Assessment 1.Do you know who your critical suppliers are and how much their failure would impact your company’s profits? 2.Have you fully mapped your critical supply chains upstream to the raw material level and downstream to the customer level? 3.Have you integrated risk management processes into your supply chain management approaches? 4.Do you have routine timely systems for measuring the financial stability of critical suppliers? 5.Do you understand your tier 1 production facilities and logistic hub exposures to natural catastrophes? 6.Is supply chain risk management integrated into your enterprise risk management approach? 7.Do you record the details of supply chain incidents and the actions you have put in place to avoid future incidents? 8.Do your tier 1 suppliers have business continuity plans that have been tested in terms of their viability? 9.Have you provided risk training to your supply chain management team? 10.Is risk on the agenda at performance meetings with your strategic suppliers? Your supply chain ‘Health Indicator’ How many ‘Yes’ answers did you score? 8-10 –You probably have a good understanding and control over the risks you face 5-7 – You may have a number of key gaps which could impact your reputation or profitability 3-4 – How are you sleeping at night? 0-2 – Good luck

© Zurich Insurance 3 Actions taken to drive costs out of the supply chain can drive greater risk in Understanding the challenges SC2.1(V2)Jul/05/10GC/ZCA Global sourcing Partnerships/ strategic suppliers Single sourcing Just-in-time manufacturing Market Shortages Increased Complexity

© Zurich Insurance 4 And if something happens …. Implications on shareholder value 4 Source: Vinod Singhal/Kevin Hendricks The Effect The Duration

© Zurich Insurance 5 BCI Survey 85% of companies experienced at least one disruption Zero incidents At least one! 15%3%56%16%6%4% More than 51 incidents Between 21 and 50 incidents Between 11 and 20 incidents Between 6 and 10 incidents Between 1 and 5 incidents

© Zurich Insurance 6 40% of disruption originates below tier one Tier 3+ Supplier Tier 1 Supplier Tier 2 Supplier 265 respondents were able to identify the tier in which the disruption originated across 327 incidents.

© Zurich Insurance 7 Leading causes of disruption... Adverse weather Unplanned outage of IT or telecoms Transport network disruption Earthquake / tsunami Failure in service provision by an outsourcer Loss of talent / skills Product quality incident Volcanic ash cloud Insolvency Civil unrest / conflict Industrial dispute Fire Cyber attack (eg Malware, DDOS attack)

Identify vulnerabilities Quantify and benchmark risk exposures Prioritize mitigation actions Informed decision making Understanding where and how your supply chain could be vulnerable Support operational profitability SC8(V1)Jul/05/10GC/ZCA

© Zurich Insurance 9 Supply Chain Risk - the challenges? Mapping the interdependencies Having the right skills and tools Cross functional approach Developing solutions In assessing your Supply Chain Risks consider: Information/financial flows Assets and infrastructure Organisations & inter-organisational networks Macro issues including economic and political

© Zurich Insurance 10 Assessing the risk – the industry and supply exposures What external factors influence the vulnerability of the supply chain? First 8 factors EconomicSupply chain Political Structural Geographical

© Zurich Insurance 11 Analysis of Supplier Locations

© Zurich Insurance 12 Product Management Supplier Selection Supplier management Suppliers Security of supply SC7(V1)Jul/05/10GC/ZCA Due Diligence information on key suppliers

© Zurich Insurance 13 Will your suppliers still be around?

© Zurich Insurance 14 Understanding the challenges Risk factors other Due Diligence Areas Contract management IP Issues Regulatory Issues Business Continuity

© Zurich Insurance 15 How companies have benefited through risk assessment SC11(V3)Jul/05/10GC/ZCA Two key suppliers at the next level in the supply chain were in significant financial trouble Company discovered that key component supplier and its alternative were located in earthquake zone Exposure due to potential failure of a supplier higher than initially estimated: USD10 million vs. USD1 million Exposure due to potential failure of a supplier higher than initially estimated: USD10 million vs. USD1 million Actual reliance on one supplier significantly greater than presumed: 70% vs. 20% Actual reliance on one supplier significantly greater than presumed: 70% vs. 20%

© Zurich Insurance Supply chain loss events

© Zurich Insurance Supply chain loss events – Automotive Country of event

© Zurich Insurance 18 Risk Rating Model GSP Historical database of supply disruptions Assessment and grading Industry and supply research Other lines of business Insolvency assessment Accumulation database Value flow mapping Zurich supply chain rating risk model

© Zurich Insurance Reduced fluctuations in results Balance sheet protection Protect brand & reputation Informed decision making Protecting profitability and balance sheet funding Maintain customer relationships Tailored to Your Needs SC12(V2)Jul/05/10GC/ZCA

© Zurich Insurance Unique peace of mind through broad coverage SC13(V1)Jul/05/10GC/ZCA

© Zurich Insurance 21 Risk identifications Risk insights Benchmarking Proactive alerts Balance sheet protection Quantification of disruptions Due Diligence a process that protects your supply chain and profitability SC19(V2)Jul/05/10GC/ZCA

© Zurich Insurance 22 SC25(V1)Sep/23/10GC/ZCA Getting started on your 3 top priorities? New products/services check your supply partners Risk assessment top 3 suppliers in profitability Drive cost savings and supplier compliance

© Zurich Insurance 23 Conclusions Performance management Proactive competitive Advantage Proactive competitive Advantage Supply chains are lifeblood of your company Supplier Due Diligence Critical Supplier Due Diligence Critical

© Zurich Insurance 24 Thought leadership to help you understand today’s and tomorrow’s risks SC21(V1)Jul/05/10GC/ZCA

Nick Wildgoose Global Supply Chain Product Manager Tel SC22(V1)Jul/05/10GC/ZCA