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States must be a natural one, driven
by economic factors, and not by
If the authorities want to give the
phenomenon a boost, it should address
tax and regulatory constraints to the
operation of companies in the country,
“To force supply chains into a certain
region does not make a lot of sense, and
it could put American companies into a
position of disadvantage,” he said.
Protective measures could drive
production costs up, as wages in
America remain much higher than in
countries that are vital supply chain
markets, such as Mexico or China.
Experts have stressed that industries
like consumer electronics, high tech
and footwear could suffer considerable
impact if restrictive actions are taken
against China, while the automotive
been highlighted by the latest annual
report on the matter by the Chartered
Institute of Procurement & Supply as
a major factor behind an increase in
supply chain risks.
The moving of supply chain links
from emerging economies to the
U.S. should also have a significant
effect on the insurance programs of
It will require them to restructure
their programs in order to reflect a
broader American footprint, replacing
local coverages purchased in foreign
markets with others purchased in the
U.S., and sometimes acquiring policies
that are not really needed in other
That’s the case, for example, with
workers’ compensation policies,
said Logan Payne, the assistant vice
president in Lockton’s global client
services group. “In some countries,
workers’ compensation is covered by
social security systems, while here it
is necessary to purchase a separate
insurance policy,” he said.
Working mostly in the United
States also means that a higher share of
a company’s activities will be exposed
to a legal system where jury awards
are much higher than elsewhere.
Therefore, liability programs could
become more expensive as local
policies purchased abroad are replaced
with American ones, Payne said.
The concentration of the supply
chain in a single region also means a
concentration of business interruption
risks. As such, it increases the risk that
production will suffer major disruption,
if a large event hits one of the supply
On the other hand, risks linked to
the shipment and transportation of
goods and raw materials should be less
of a worry, Payne said.
“With a more regionalized supply
chain, where supplies are much closer
and there is less need for transoceanic
cargo shipment, transportation is one
area where insurance costs should be
reduced,” he said.
An additional complication is that
decisions about supply chains, more
than ever, now entail a significant level
of reputational risk.
“The basic message is to be more
national, don’t just be global,” Richard
Edelman, CEO of marketing firm
Edelman, told Reuters during the
World Economic Forum in Davos.
“Let’s try and pre-empt that tweet
by having a long-term discussion about
the supply chain.” &
RODRIGO AMARAL is a freelance writer
specializing in Latin American and
European risk management and insurance
markets. He can be reached at riskletters@
sector is exposed to any new tariffs on
imports from Mexico.
Furthermore, tit-for-tat reactions
from foreign governments could restrict
the access of American companies to
export markets, and retaliation from
China would be bad news, for example,
for the aerospace industry.
The rise of protectionism, not only
in the U.S., but also in Europe and
other parts of the world has actually