Business Interruption in Manufacturing: Managing Common Exposures

Business Interruption in Manufacturing: Managing Common Exposures

Your manufacturing company normally runs like a well-oiled machine. Unfortunately, various events can disrupt your business. From cyberattacks and supply chain issues to hurricanes and flooding, here’s a look at the business interruption risks threatening manufacturers now.

Hackers Are Targeting Manufacturers

IBM’s 2022 X-Force Threat Intelligence Index warns that ransomware actors attempted to disrupt global supply chains in 2021 by attacking manufacturers. In 2021, 23% of all ransomware attacks targeted manufacturing, making it the most targeted industry.

According to CISA, cyber criminals have diversified their approaches to extorting money. In addition to encrypting the victim’s networks, hackers may also disrupt the victim’s internet access, publish sensitive information and tell partners, shareholders or suppliers about the incident.

These tactics mean that backing up information may not be enough to prevent losses. Prevention is always ideal. CISA says that the top three initial infection vectors for ransomware are phishing emails, Remote Desktop Protocol (RDP) exploitation and exploitation of software vulnerabilities. According to IBM, 47% of ransomware attacks against manufacturers were caused by unpatched vulnerabilities.

Other Supply Chain Issues

Ransomware is not the only possible cause of supply chain disruption. In the last two years, the pandemic, worker shortages, material shortages and shipping backlogs have highlighted weaknesses in the global supply chain. According to Accenture, 94% of Fortune 1000 companies have seen supply chain disruptions related to COVID-19.

The pandemic has been a wakeup call, and many business leaders are taking steps to protect themselves from future disruption. In 2021, McKinsey & Company surveyed senior supply chain executives to see how they were strengthening their supply chains. Among other actions, 61% said they had increased inventory of critical products, 55% said that were dual sourcing raw materials, 42% said they had increased inventory along the supply chain, 25% said they had regionalized the supply chain and 23% said they had expanded backup production sites.

Extreme Weather Events

Natural disasters and extreme weather events are another common cause of business interruption, and these disruptions appear to be increasingly common. According to the United Nations and the World Meteorological Organization, climate and weather-related disasters have increased fivefold over the last 50 years.

In Florida, hurricanes and other tropical storms are the primary threat. The 2021 Atlantic hurricane season included 21 named storms, and the 2020 Atlantic hurricane season included a record-breaking 30 named storms.

NOAA says that 2021 was the sixth consecutive year above-normal Atlantic hurricane season. There were seven hurricanes, including four major hurricanes, and eight storms hit the U.S. coastline.

Climate change may be making hurricanes worse. According to NOAA, rising temperatures may cause higher coastal flood levels, increased tropical cyclone rainfall and more intense tropical cyclones.

Even when a storm does not cause significant property damage, businesses may experience disruption caused by supply delivery delays and shutdowns necessitated by evacuations. If property damage occurs, the business interruption may be prolonged.

Risk Management Best Practices

When various events disrupt operations, the results can be lost revenue and dissatisfied clients and partners. Strong risk management practices can help minimize losses.

  • Conduct a cybersecurity audit. Hackers will exploit any technological or human vulnerabilities that they can find. Make sure your systems use secure settings and have the most up-to-date patches available. You should also be using multifactor authentication and training workers on cybersecurity.
  • Review your operations for supply chain vulnerabilities. Consider how supply chain issues would disrupt your operations and what steps can be taken to minimize these disruptions. For example, can you increase inventory or use additional suppliers?
  • Create emergency response plans for cyber and extreme weather events. Consider what actions need to be taken before, during and after emergency events to minimize damage. For cyberattacks, also consider compliance issues related to data breach notification laws. has resources for emergency response plans.
  • Secure sufficient insurance coverage. Cyber insurance and property insurance with business interruption coverage can help protect your business from many losses related to business disruption.

Need Guidance?

Wilson, Washburn & Forster is a boutique independent insurance agency that has been in business since 1961. We have expertise and connections in cyber and business interruption coverage for manufacturing companies. You will find that our experience, claims handling, service, and community commitment is unrivaled.

Contact us today at 786-454-8384 for a complimentary analysis of your current insurance program by an insurance specialist in this field.

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