On the heels of last year’s contingent business interruption fallout from the Japan earthquake and Thai flooding, global modelling firm, AIR Worldwide (AIR), has announced that it has expanded its offerings to include catastrophe-related supply chain risks.According to AIR, the new offering will help risk managers better assess and reduce their risk from catastrophic perils such as hurricanes, earthquakes, floods, tornadoes, and tsunamis. This includes risk not only from physical damage but also from direct and contingent business interruption losses across the entire supply chain network.“The catastrophe risk to supply chain networks came into focus following the volcanic eruption in Iceland in 2010. Just one year later, awareness of this risk was heightened further by the Tohoku earthquake and tsunami in Japan, as well as the major flooding in Thailand,” said Dr Akshay Gupta, director of AIR’s Catastrophe Risk Engineering practice.“While the catastrophe risk to supply chain networks is quite complex, it can be effectively quantified. Once completed, the work involved to quantify this risk can also help expand risk assessment to other noncatastrophe perils.”A supply chain is a collection of operational points that are linked based on functional and revenue stream relationships. Traditional approaches to assessing the risk, said AIR, are based on a worst-case scenario, establishing a zero percent or 100 percent disruption one point at a time and reproducing the impact through the entire supply chain.“It does not include the likelihood or frequency of shutdown, nor does it consider the partial shutdown of a single node or the simultaneous disruption of multiple nodes,” said explained Dr Gupta. “This traditional approach can now be improved to provide a realistic and comprehensive assessment of the supply chain’s catastrophe risk exposure.”Dr Gupta continued: “AIR’s CRE solutions combine a detailed network analysis with catastrophe risk models. As a result, partial damage and downtime states for all nodes can be simultaneously and explicitly considered. CRE solutions also account for the level of disruption at each location from multiple perils. By quantifying the impact of these disruptions on the overall supply chain network, CRE solutions provide a much more realistic and reliable view of downtime and loss.”