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Despite the numerous events that can disrupt today’s complex global supply chains, shippers frequently fail to prioritize cargo risk management strategy. However, with the coronavirus outbreak and the resulting disruption of global trade, many shippers realize the benefit of specific preparations.
At this time, shipping delays are a distinct possibility. Most businesses report coronavirus-related transportation limitations are causing supply chain problems. That’s on top of the numerous other dangers that your supply chain faces regularly.
You can better understand the risks that face your operations and ensure that your company is prepared by protecting the value of the items you send throughout the world with the right risk-management plan.
Are you aware of your risks?
When importing or exporting goods, it’s vital to understand the potential dangers to your shipment. These risks could include not only the current pandemic but also significant occurrences such as storms, floods, political turmoil, and daily issues like fraud, counterfeiting, and documentation errors. Any of these factors can cause the delivery of even the most meticulously planned global shipment to be delayed or ruined.
Once you’ve identified your risks, you may insure your items to safeguard their worth against potential losses while they’re being transported by air, sea, or train.
Remember that most cargo insurance policies don’t cover revenue lost due to a public health emergency, such as the coronavirus epidemic. In China, however, the virus resulted in a delayed Chinese New Year, which caused product exports to be delayed. Many Chinese importers use accelerated shipping services to refill inventory as factories return to total capacity, and cargo insurance will protect them from further risk.
Value your risks
Cargo insurance is widely available to safeguard the value of delivered products from physical damage, theft, or other disasters. However, you or your consignee must ensure that the coverage you choose is the ideal fit for your specific risk exposure before purchasing it.
This is a relatively simple task to accomplish. To determine your potential loss, first, calculate the likelihood of a risk event occurring and multiply it by the cost of your cargo value. For example, add those two amounts together if you calculate that a risk event has a 0.25 percent chance of occurring and you’re moving cargo worth $5 million. Your possible loss in this situation would be $12,500.
Then, with that estimate in hand, you can lower the predicted loss by lowering the chance or cost of occurrence. This might assist you in determining the correct quantity of insurance to obtain.
There are also other recommended practices you can use to limit your cargo risk, in addition to purchasing the appropriate amount of insurance for your cargo. Make sure the valuation clauses for your shipments, for example, specify the maximum amount an insurance company will pay in the event of a loss. The commercial invoice value and any prepaid charges related to the shipment, such as freight, customs clearance, or duty, are usually included in valuation clauses.
Using an insurance intermediary with specific knowledge or experience in international logistics and transportation insurance might also be beneficial.
Moreover, if you hire a third-party logistics company, make sure they have risk management experts on staff. They frequently have the user experience that can assist you in identifying potential supply chain liabilities so that you can better understand your risk management requirements and develop appropriate solutions.
These hard times serve as a reminder that transporting commodities around the world is potentially very dangerous. And, while cargo insurance has many complications, it’s critical that you understand and navigate them to acquire the best coverage. That way, if and when the unexpected occurs, you may rest easy knowing that you’ve taken precautions.
Informatics is always accessible to help with your insurance software needs, and we recognize and emphasize the need for a culture fit and improved cooperation and provide appropriate solutions for moving forward. We assist insurance firms to make fast, customer-centric choices by providing end-to-end software solutions and platforms. We’re also experts in banking and infrastructure solutions. Don’t hesitate to get in touch with us right away if you have any concerns!
Written by Siththy Waseema