Read The Question & Answer. Do You Agree With The Answer? Why Or Why Not. Explain.

Question: How does insurance facilitate global supply chain?

Answer: Insurance facilitates global supply chains by taking some of the burden of away to mitigate the financial impact of lost, damaged, or stolen goods. Companies look for insurance to cover for potential business interruptions, so they get (BI) and (CBI) which is business and contingent business interruptions in their property insurance. According to (SDC) Supply & Demand Chain Executive "both BI and CBI insurance cover AGCSs clients net profits in the event an insured peril damages or destroys a covered property and interrupts production. Both protections also cover some ongoing costs for the policyholder, such as wages, building lease or mortgage costs and other fixed costs". With these measures businesses transfer their risk over to their insurance company. Typically the users can have their full property insurance cover their business interruptions losses, insurance companies cover the insured when their property has been damaged or destroyed. This gives the company owners liquid funds so that their operations aren't halted for long if at all by the damages.

That is what happens for business interruptions, that type of insurance only reacts when the insured persons property has been damaged or destroyed. While (CBI) responds when the affected property is controlled by a supplier or customer that is of value to the insured party. According to (SDC) "In that loss scenario, the insureds own property is undamaged. However, CBI insurance would be triggered if the insured is still forced to slow or halt productionand therefore loses profitsbecause the supplier with damaged operations cannot deliver critical raw materials...". This insurance allows businesses to recoup their losses, that they would sustain from outside sources, be it cargo shipments sink and or throwing off their supply's. While insurance is the easier method for risk management in companies it shouldn't be their only option. Insurance only covers parts of the risk that companies take in order to ship and receive globally.