Our world economy has exploded in the last half century thanks to globalization, the resulting rise of global trade, and advances in technology. According to 2015 data from the United Nations Conference on Trade and Development, international trade in goods and services grew from around $4 trillion in 1990 to $24 trillion in 2014.
That astonishing growth would not have been possible without the transportation industry. It’s the engine that keeps the global economy running. However, like any complex engine, there are many moving parts, and countless exposures.
How do you navigate?
The first step is awareness – keeping your finger on the pulse of our changing industry and the evolving nature of risk. The 2016 Transportation Risk Index by Willis Towers Watson analyzes the biggest threats facing today’s transportation companies. While the risks are numerous, the report identifies five overarching trends for the industry.
The five risk “megatrends”
- Geopolitical and regulatory uncertainties. Transportation firms looking to expand into new markets are increasingly confronted with geopolitical uncertainties, changing markets and evolving regulatory requirements. Governments and regulators can cause major disruptions for businesses, and transportation companies are being forced to constantly reassess their exposure to events outside their control.
- Advances in technology and digital vulnerabilities. The digital age transformed the way the world does business and moves goods. It also created a whole new world of supply chain risks including threats from cyber-crimes and data breaches, concerns about critical IT systems, increased vulnerability from mobile devices and third party security vulnerabilities. Supply chains today are more connected and dependent on technology than ever, and transportation companies need to have a robust and evolving cyber-risk management strategy.
- Changing markets and outdated business models. Transportation companies are under increasing pressure to create more dynamic business models that can better respond to an increasingly unpredictable global marketplace. Businesses are still contending with fluctuating commodity prices and interest rates, fickle consumers and emerging competitive markets, but now they’re also contending with state-sponsored and non-traditional competitors.
- Complex operating models in an interconnected world. In an increasingly connected world, what happens in one area of the globe can have a ripple effect on the entire global economy, and supply chains now rely heavily on multiple third-parties. With these global supply chains getting more connected and complex, even the most resilient transportation companies can find themselves vulnerable. New partnerships and alliances are formed, compromises are made and some companies find themselves working with less than ideal partners in less than ideal markets. Transportation companies must continually reevaluate their operating models in this evolving environment.
- An increasingly complex global workforce. With Baby Boomers retiring in record numbers, transportation companies are having to shift their focus from finding enough workers to finding the right workers, and a shortage of skilled workers is making an already competitive marketplace even more so. Companies need to invest the time and resources into attracting and retaining the best talent to stay competitive.
These risks are inextricably connected, and this complex risk environment demands customized risk management solutions. That should include having a business insurance partner like Higginbotham in your corner, offering expertise in both transportation insurance and global risk. Contact us today.