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Supply Chain Man-Made Risk

Supply chain man-made risk is the possibility that your supply chain is disrupted by events like fires or explosions. This type of risk is usually caused by a specific action or inaction taken by a person or group.

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Man-Made Risk Example: Ford Supplier Fire

In May 2018, a major fire at Meridian Magnesium Products of America significantly impacted American automaker Ford.  Due to a parts shortage caused by the fire, Ford had to temporarily halt production of one of its most popular pickup trucks.

In addition to halting production of the truck, which accounted for one-third of the total vehicles the company sells each month, they had to temporarily suspend 7,000 workers.

By market closing on the day of the announcement, Ford's stock had fallen by nearly 2%.

3 Things To Know

1. Fires and Explosions Are Some of the Most-Feared Risks

The Allianz Risk Barometer 2018 rates fires and explosions as one of the most dreaded causes of business interruption—they came in at number two, behind only cyber risk. 

2. Fires and Explosions Have a Ripple Effect

Fires and explosions have a short-term impact, but can also have long-term ramifications. If a man-made risk event takes down a supplier, you should be on the lookout for what might come next: force majeure, lawsuits and maybe even crippling financial problems.

3. You Can't Rely on Suppliers to Self-Report

If you think you’re going to be first on the call list when one of your suppliers experiences a fire or explosion—you’re wrong. And if you’re not first on the list, then you’re already behind. Actively monitoring your suppliers for man-made risk events is a key part of any supply chain risk management strategy.

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