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This year has been a challenge for many industries. From historic workforce shortages in construction and health care to soaring material costs, there have been obstacles to productivity stemming primarily from COVID-19. One of the headline-grabbing issues has been supply chain disruptions.

Earlier this month, two of the top retailers in the United States posted significantly higher inventories in their quarterly reports: up nearly 30% and 40% for Walmart and Target, respectively. In their press release on the situation, Target announced their intent to refocus their strategy on reducing inventories by marketing down the costs of their goods. At the same time, the Federal Reserve announced a 0.75% rate increase in an attempt to quell inflation, the largest increase since 1994. This update follows the May 0.5% increase, which was the first increase since 2000.

On the surface, these two items seem contradictory: decreasing costs of goods at major retailers, and increasing interest rates that make it more expensive to borrow money through loans. What does this mean to businesses, and what are the anticipated impacts?

Many unintended consequences resulted from the pandemic, and it’s likely that there will be more impacts coming as the nation–and the world–settles into a new normal. There were major  market impacts as a result of economic stimulus funds, and many retailers saw large increases in demand as consumers spent more money.  Large and small retailers were tempted to double and triple their orders because of fear of impacts of the supply chain and unavailability of materials and resources. This increase in retail goods was not likely to be sustainable, and the market is shifting and settling in a post-pandemic era.

Similar fears exist in the construction industry, where general contractors have effectively relieved big box home goods stores of their responsibilities as logistics managers. Now, materials like windows, doors, lumber, etc., are sitting on construction sites long before they are going to be installed in a project–leaving the materials vulnerable to damage, theft or mysterious disappearance while not in use.

In both the retail and construction examples–and other industries not mentioned–these supply chain obstacles create new questions for businesses and insurance providers. It begs the questions: who is responsible for these materials? Who decides where and how they will be stored until needed? Who bears the burden of the losses?

Questions like these show new areas of risk and risk management that the experts at RiskVersity can answer. Our RiskVersity team helps retailers, contractors, and clients answer these questions when developing an effective risk-management strategy.

Here are three questions that help with planning for larger supply chain risks:

  1. It starts with understanding the current working environment and larger marketplace. For instance, answering the hard questions like how does a war (like the current one in Ukraine) or pandemic affect my business?
  2. What can I do to minimize those negative impacts?
  3. What is my plan in the event these external obstacles arise?

If your organization is struggling to answer these questions, contact RiskVersity today. We can advise on the best path forward to protect your organization, its people, and its assets. We are ready to start the conversation today.

Photo by Tom Fisk

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