Senior management may understand that fierce competition, foreign trade barriers, rising prices for raw materials and energy supplies, and new government regulations are issues to be addressed. Terrorism is also receiving much more attention than in the past. At the same time, there are other sources of significant risk that may not be well understood by executives. For example, many organizations' supply chains are becoming longer and more global, exposing them to potential operations disruptions, should natural disasters, labor actions, terrorism, or other incidents directly affect suppliers.

The very products manufacturers produce carry with them associated liability exposures related to defects or unanticipated harmful effects. Developing new products and selling them in new markets also exposes companies to risk. Should an organization face a sudden, unexpected business disruption, it will need to respond effectively and implement emergency response and business continuity plans to return the organization to normal operations as soon as possible. Yet many organizations do not have adequate plans in place to handle such possibilities.

Rising workers' compensation costs are another issue of concern. Related costs are increasing at an alarming rate for many companies and have a direct, bottom-line effect. For example, a company with $500,000 in workers' compensation-related costs and a 5 percent profit margin needs to sell $10 million-worth of products just to cover those costs.



Homicide is the third-leading cause of fatal occupational injuries in the United States. According to the Bureau of Labor Statistics Census of Fatal Occupational Injuries (CFOI), there were 609 workplace homicides in 2002 in the United States, out of a total of 5,524 fatal work injuries.
MROtoday.com, 7/8/2004

Outsourcing is a growing trend among many companies. For example, according to MarketResearch.com, the U.S. market for outsourced pharmaceutical manufacturing is growing at a rate of 10 percent to 12 percent annually. While outsourcing may offer potential cost savings to companies, it also can expose them to significant risks as portions of their operations are handled by companies that may not share the same legal or IT standards. Additionally, the companies may operate in countries without adequate levels of communications and transportation infrastructures.

When considering the host of risks that confront them, executives at manufacturing companies need to be asking themselves a variety of questions, such as:

• Do we know what our organization-wide, strategic, business, and financial risks are? Have we prioritized them? Do we have programs in place to address them?
• Are we in compliance with all applicable government regulations?
• Do we have the technological capability to properly collect, analyze, and use risk-related data to proactively manage our risks? In the event of an incident, do we know how to recover lost or damaged data?
• How well do we protect our valuable IT assets?
• How vulnerable is our supply chain?
• Do we know how an unexpected business disruption would affect our business? Have we prepared for such an eventuality?
• Have we adequately protected our facilities and employees from terrorism?
• Are our workers' compensation claims having a significant influence on the organization's bottom line? Do we have other employee-related issues that are affecting overall productivity? Do we have adequate employee screening programs in place to make sure we are hiring people we can trust?
• Do we have any product recalls pending or ongoing? Do we know how to manage them properly?
• Is the company planning a merger or acquisition? Have we assessed all the associated risks? Do we know how to properly manage such an undertaking?
• Are we planning to develop any new products or enter any new markets? What are the risks associated with such actions?
• Do we know how to prepare an insurance claim properly to realize the greatest possible award?
• How can we more effectively communicate with our key internal and external stakeholders?

With an ever-widening gap between baby boomers and Generation Y [people born between 1980 and 1994] managing this work force is an undeniable issue. Eric Chester, author, names four main challenges companies face with this work force: recruiting, training, managing and retaining a quality staff. "Employers can't always do what they've done and expect to get what they've always gotten," said Chester.
U.S. Business Review, June 2004

Mitigating Business and Technology Risks
While the number of risks facing manufacturers can seem daunting, there are a number of resources available to help address them. For example, business risk consulting helps manufacturers develop the internal processes necessary to identify, quantify, prioritize, and manage the organization-wide risks they face, whether internal or external in nature. These processes also help ensure that companies are in compliance with all government regulations.

Risk technologies offer a wide variety of tools to help companies collect, analyze, and manage risk-related data; recover data that has been lost or damaged; and protect important IT infrastructure.

Minimizing Supply Chain and Operational Disruptions
Integrated supply chain management helps companies understand the vulnerabilities that exist in their increasingly complex and interconnected supply chains and develop strategies to minimize such exposures.

In such an environment, business continuity management (BCM) quickly and efficiently can help minimize disruptions and return organizations to "normal business operations." BCM combines emergency response planning, crisis consulting, and business continuity planning to help companies prepare for, respond to, and recover from the unexpected. It also can help ensure compliance with all applicable rules and regulations.

Protecting Property and Employees
In a post-9/11 world, all manufacturers need to consider the physical safety of their employees and facilities. Property risk consulting can help clients identify weaknesses and recommend actions to improve them. Security consulting provides a wide array of services to protect people and physical assets.

While employees are any organization's most important assets they also can serve as a significant source of risk. Rising workers' compensation costs are affecting many organizations. However, there are a number of pre- and post-injury programs that can help reduce related costs.

In addition, workforce strategies consulting offers a number of programs to help improve overall productivity. Violence in the workforce must be a concern for any employer. Critical incidence planning and prevention helps organizations address issues involving compromises in company security, threats of violence, and critical incidents. Background screening services help ensure that employers are hiring the right people.

Managing Product Recalls and Communicating with Stakeholders
The heart of any manufacturer is the products it makes, and a wide array of risks also exist there. Product liability consulting helps companies identify potential issues and manage product recalls that may exist. In addition, from time to time, most companies will have insurance claims activities they must address, either on their own behalf or in response to a claim made against them. Various claims consulting services help manufacturers achieve the best possible outcome from such events.

Finally, every manufacturer has a number of key stakeholders—such as employees, shareholders, regulators, the media, customers, partners, and surrounding communities—with whom frequent communication must be maintained about the risks manufacturers have and the actions they are taking to address them. They also need to be regularly informed about how companies are responding when bad incidents do occur. This helps protect company reputations in good times and defend them in adverse ones.

By leveraging the expertise of these different risk consulting specialties, manufacturers can better manage their risks, reduce overall exposures, respond in more effective ways and, in general, improve their overall performance.

Marsh has the tools and solutions to assist manufacturers identify, prioritize, manage, and recover from the wide variety of risks they face. Working together, we can help you stay ahead of such risk issues and manage your recovery efforts.



If you have any questions or would like additional information, please contact us.