4/21/2020 - By Saltmarsh, Cleaveland & Gund
For many businesses, COVID-19 has already caused significant supply chain disruption. Others are bracing for impact. These disruptions—the extent of which remain to be seen—are likely to last until the outbreak is contained and the global economy starts to rebound.
While the novel coronavirus is front and center, it isn’t the only issue plaguing supply chains. Even before the virus became a pandemic, businesses had begun to re-evaluate their supply chains following the U.S. trade tensions of the past year.
We’ve summarized the top 4 supply chain issues driven by the recent disruption:
Despite the uncertainty surrounding the intensity and duration of disruption, there are reactive steps companies can take now to minimize the damage of this crisis or better prepare for future disruptions. To address immediate risk, companies should identify which Tier 1 suppliers are experiencing production slowdowns and look for alternatives—especially those that provide critical materials or goods—and likewise evaluate issues with Tier 2 and Tier 3 suppliers.
Companies should also familiarize themselves with their insurance policies and understand the extent of their parametric coverage. For COVID-19 specifically, pay close attention to whether or not insurance coverage contains a Communicable Disease Exclusion.
Reactive steps taken now can help contain the damage or prepare companies for future disruptions, which do not generally come with a timetable. Looking ahead, companies should be proactive to guard against supply chain issues that result from ripple effects associated with this pandemic or future unexpected disruptions:
To help organizations and their suppliers, business partners, and distribution companies identify, evaluate, and address supply chain risks, the AICPA recently released a framework—SOC for Supply Chain. Organizations can use this framework to communicate relevant information to stakeholders about their risk management efforts related to the production and delivery of goods. A report that follows this framework can help businesses uncover weaknesses throughout their supply chains and ensure there are controls in place to address them, ultimately building trust with vendors, customers and business partners ahead of disruptions.
If you have specific questions, please reach out to your engagement shareholder, manager or another member of our team. General questions and inquiries can be directed to Jayme Terrell.
Visit our COVID-19 RESOURCE HUB for ongoing updates and information. Due to the ever-changing nature of this event, you should always consult the appropriate professionals.
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