Tim Gallagher
Senior Vice President, Business Insurance Market Leader
Manufacturers face a range of risks that can cause business interruptions, including supply chain breakdowns, automation glitches, cyberattacks, and weather-related events that affect operations, locations, and access. The COVID-19 pandemic led to widespread operational stoppages for multiple reasons. Cyber risk has grown and become more interconnected. Observed weather patterns have changed in some regions, with reports of increased frequency or severity of extreme events.
Disruptions to manufacturing can have broader economic effects: transportation and distribution can be delayed, inventories may need to be adjusted, and downstream customers can experience shortages. Disruptions in distant parts of a supply chain can affect a production line within days. Regional plans alone may be insufficient; planning for interruptions increasingly benefits from a global perspective.
The duration and severity of an outage depend in large part on preparedness and the effectiveness of response and recovery actions.
Manufacturing is vulnerable to a variety of possible causes of shutdowns.
Supply chain interruptions
According to the Marsh McLennan Agency (MMA) Manufacturing Risk Report, 80% of organizations in 2024 reported supply chain disruptions, with most experiencing 1-10 disruptions over 12 months. The report indicates a 38% increase in global supply chain disruptions over the previous year; general manufacturing was among the industries with a higher reported impact.
Automation and AI
Software updates, corrupted firmware, and other failures in automation or AI-enabled systems can cause downtime. Modern factories rely on interconnected systems where a single failure can disrupt production. Managing this risk may require new or modified equipment, updated code, or specialist service providers.
Cyberattacks
Greater automation and connectivity can increase cyber exposure. Single incidents can lock data or disrupt physical systems, affecting operations. Our report notes an increase in reported cyber incidents affecting manufacturers (reported increases of up to 300% in recent years).¹ It estimates the average cost of a successful attack on an industrial organization at about $4.73 million.¹ Factors that can increase cyber risk include:
- Downtime that can raise pressure to pay ransoms
- Use of legacy systems with unsupported software
- High interconnectivity that increases potential impacts for manufacturers, partners, and customers
Emerging cyber-related loss drivers cited by industry specialists include AI-enabled attacks, systemic cloud outages, and supply-chain-driven cyber events. Some organizations may be underinsured for certain cyber exposures or may not fully understand their exposure.
Weather-related problems
Shifts in weather patterns and localized increases in extreme events in some regions have been associated with greater potential for weather-related disruption. Impacts include building damage, supply chain disruptions, employee safety concerns, and power outages. Weather events can cause shutdowns ranging from hours to months, depending on severity and recovery capacity. The TWI Institute estimates that unplanned downtime of this type can cost an average company approximately $260,000 per hour.
Insurance is one component of protection.
Insurance can cover many consequences of business interruption, but it is one element of a broader resilience approach. Additional actions can include:
- Managing the supply chain for resilience through diversification and inventory strategies
- Proactively identifying operational risks and selecting appropriate mitigation measures
- Developing, documenting, and exercising business continuity and recovery plans
Create a business continuity plan—and exercise it.
A well-designed business continuity plan (BCP) can help reduce downtime, protect physical assets, IP, and data, maintain regulatory compliance, and support reputational resilience.
Key BCP components typically include:
- A thorough risk assessment and business-impact analysis
- Identification of potential threats and single points of failure
- Response and recovery strategies, including IT and cyber considerations
- Communication plans for internal and external stakeholders
- Supply-chain continuity and alternate sourcing plans
- Employee safety and crisis-management procedures
Developing the plan, assigning roles, and conducting realistic exercises helps verify that the plan can be executed under stress and that participants understand their responsibilities. If support is needed, consider engaging an experienced risk management advisor.
Talk with Marsh McLennan Agency.
MMA’s manufacturing specialists work with clients on business-interruption and operational resilience issues. We provide resources and services intended to help identify exposures, design mitigation strategies, and align insurance placements with operational needs.
Some organizations may lack coverage tailored to specific shutdown scenarios; working with a broker can help assess gaps and explore options suited to an organization’s circumstances. To learn more, reach out to your local MMA representative for help.
