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Western Europe flash flood alerts higher than the average worldwide for H1 2021, riskmethods says

07/28/2021 By

Spend Matters writes frequently about risk, and the risk-related consequences on the supply chain and the businesses it feeds. That’s because it’s the single biggest threat, in all its forms, to business continuity. So a large part of what we identify is looking at the steps or measures that an organization can take to improve its management of these and other risks.

We identify risk as supplier financial risk (e.g., bankruptcy, financial stress); reputational and regulatory supply chain risk (e.g., modern slavery, environmental issues, corporate malfeasance); man-made supply chain risk (e.g., fires, explosions, labor disputes); geo-political risk (e.g., wars and revolutions, terrorism, political actions such as protectionism) and natural disasters (e.g., weather events, volcanoes, earthquakes).

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Some of this risk is driven by pure incompetence or negligence, others, like the last one on our list, is natural and unavoidable, which is what we are seeing now with the violent storms and severe flooding in parts of Western Europe of late and now in central China.

The heavy rain in Western Europe has generated more water than what ground and sewage systems can absorb, flooding has forced domestic evacuation and industrial areas to shut down. Widespread disruption to logistics and manufacturing operations across Belgium, Luxembourg, parts of the Netherlands, and western Germany has ensued. German states of North Rhine-Westphalia, the country’s richest state by Gross Domestic Product (GDP) and Rhineland-Palatinate, an economic powerhouse, are experiencing flooding they have not seen in decades.

According to a report from Everstream Analytics, some of the most badly affected areas host industrial zones with dozens of high-precision manufacturing suppliers that provide specialized parts for the automotive, aerospace, technology and mechanical engineering sectors. That report, which outlines the damages from the flooding, the key industrial hubs and suppliers affected can be downloaded here: Severe Floods Across Western Europe Disrupt Manufacturing Operations in Key Industrial Areas.

Risk alert technology can help

We’ve talked to a few industry experts who have spent decades identifying and curtailing risk events such as this for organizations. Clearly technology can help, by way of example, Germany-based riskmethods told us:

“As an approximate rule of thumb, about 10% of all risk events in the supply chain are due to natural hazards. They thus represent an elementary threat to the supply chain which can barely be predicted. Therefore organizations must get better prepared for those severe weather events and it is crucial to know as much in advance as possible which risk-mitigation options to choose. Technology solutions such as riskmethods can help with many of the tasks at hand in the face of a risk event, such as risk identification, risk assessment and risk mitigation.

“We have created 32 flash flood alerts for different regions in Germany within 3 days and have alerted customers based on the geographical location of their supply chain participants (not just suppliers, but logistics hubs, the firm’s own locations and customer sites).

“This number of flash flood alerts is higher than the average amount of flash flood alerts worldwide that we’ve been sharing on a monthly basis for the whole of the first half of 2021.
It highlights several things:

  • The intensity of this natural hazard event was extremely high and has a strong impact on risk locations based in this area.
  • The flash flood covered different areas of Germany and appeared with diverse intensity across the country. We are able to show the exact regions that are facing operational limitations after the risk event; we create the alert for a precisely defined area and then identify all risk locations within it. This is how we have been able to inform our customers precisely about their specific risk situation as created by the flash flood. This includes all risk entities in the area, such as suppliers, logistics hubs like ports (sea and air), own manufacturing sites, customer sites and supply paths. It’s worth noting that this shows that many more risk locations were affected than the flash flood alerts created.
  • By creating natural hazard alerts that cover geographical areas, we can pre-warn our customers about upcoming supply chain risk very quickly and effectively.
    (We can see where the risk event is happening and then identify all risk objects in this specific area automatically.) This helps them to assess the risk at an early stage – and time is (a lot of) money in these instances.
  • While continuously monitoring the risk situation we can see that more and more suppliers in this area have declared force majeure, disasters at business partner sites have been monitored and negative revenue and growth outlook alerts have been issued. This monitoring helps our customers to get a more precise picture of the individual risk objects as the situation evolves. We see a strong increase in these alerts after the original event (the cause) has happened. An accumulation of risk events can be used to show predictive patterns that indicate bankruptcy, for example, or severe limitations in keeping the business operational.

“The areas we have alerted to risk events include:

  • Within various industries (automotive, A&D, industrial manufacturing and services, chemical) as many raw material suppliers have been affected too.
  • For different risk objects (suppliers, supply paths, logistics hubs, own manufacturing sites).
  • Within different risk areas (natural hazards, financial viability of suppliers, disasters at supplier sites) which helps the customer to get a precise understanding of the possible impact the risk event will have on their business.

“With climate change, we will see these events more frequently. Areas that historically have not suffered such severe weather events will be drastically impacted. It’s critical when using  a supply chain risk management solution to cover all kinds of risk, and not just to identify those risks but to have clear assessment and mitigation plans in place.”

How do you find the right procurement technology and vendor for your company? Spend Matters’ new 5-step “Procurement Technology Buyer’s Guide” can help — with how-to documents, checklist templates and other tips.