POL I CY The Israeli Insurance, Pension & Finance Newspaper 38 Special edition 2022 Israeli clients, especially those with global activities, are becoming increasingly concerned about obtaining adequate insurance solutions which are tailored to the new reality. The main challenges faced by global companies at present are twofold:The supply chain, which is becoming increasingly significant and key element for organisations to ensure their survival, improve their ability to compete and achieve growth. The climate crisis, which is expected to increase various risks in the mid to long term including material damage and liability risks, together with regulatory changes aimed to protect the economy from another financial crisis of the type seen in 2008. The supply chain Globalisation at the end of the 20th century and the beginning of the 21st century lead to a substantial increase in global trade, widespread transfer of production activity from Europe and North America to the Far East, and in turn to a substantial increase in exports from China and other countries as well as a major increase in shipping by sea, which is the main means of transportation for export goods. Some of the major effects of the coronavirus pandemic are supply chain disruptions, delays at ports and a sharp increase in the costs of raw materials and shipping costs. These factors created a chain reaction which is effecting all industries including electronics, motor vehicles, pharmaceuticals, metals and in the supply of consumer and industrial goods including medical equipment. The global shortage of microchips and increased demand – in addition to the coronavirus pandemic which lead to a partial or complete shutdown of production plants and disruptions in the global supply chain, the emergence of highly computerised electric and autonomous motor vehicles, has led to a sharp increase in global demand for microchips and processors, which is in turn leading to a global shortage and even partial shutdown of production lines, especially in the motor vehicle industry, which uses various types of microchips to assemble cars.The time and costs involved in constructing a microchip factory are exeptionally high(billions of dollars), thus overcoming the shortage will not be quick and it is widely believed that we will continue to experience shortages in the near future. Production plants that have operated around the clock over the last year have still not managed to satisfy demands. Prolonged shortages are expected to increase income for the microchip industry even more. The lack of stability means that some industries will see a transition to increased local stock management and maintenance, as part of a process of reorganising and redefining the supply chain as an essential organisation-wide unit, integrating state of the art technological systems to increase production, streamlining processes and even opening new branches in the Far East to support the production process. The global climate crisis Two years into the coronavirus pandemic, it appears that the world has not yet managed to cope with all of the supply and delivery challenges that have come with it, even though it is clear that the pandemic is not the only culprit for supply chain disruptions, another one being the climate crisis. The supply problems of the last two years are expected to worsen in line with the climate crisis and making suitable plans ahead of time is an essential consideration in system-wide planning for the future. To avoid climate crisis related problems, companies will need to map-out and identify challenges to optimise their supply chains by pinpointing areas prone to weatherrelated events, ensure that logistic centres located in these areas are adequately protected against natural perils and implement state of the art technology to mitigate the effects of drought, wildfires etc.. It is obvious that making such contingency plans and completely reorganising supply chains is a lengthy and costly process which may involve extensive changes to corporate strategic planning and increased operational costs. To sum-up: Executives of organisations who are conscious enough of the dynamic global environment to make adequate contingencies to mitigate and resist such exposures, will find their insurers willing to strike the balance between the exposures and the preparedness of the organisation and provide broad and competitive insurance cover, giving peace of mind to the business. THE GLOBAL VILAGE WE LIVE IS CONSTATLY AND RAPIDLY CHANGING By Yasmin Koren CCO, Deputy General Manager, Aon Israel
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