The role of parametric insurance in reducing supply chain risks: WRMS’ Agarwal
According to Ashish Agarwal, Co-founder & CTO of Weather Risk Management Services (WRMS), combining parametric insurance with traditional risk management strategies can provide a comprehensive framework for managing supply chain risks.
In a recent interview with Artemis, Agarwal highlighted that supply chain disruptions, whether caused by natural disasters, infrastructure failures, or regulatory shifts, present serious risks to businesses globally.
“Our supply chains are increasingly susceptible to a range of risks, from natural disasters to political instability and operational hiccups,” Agarwal said.
He continued, “Traditional risk management strategies often focus on identifying these risks, assessing their potential impacts, and putting preventive measures in place. However, in a world where risks can evolve unpredictably, relying solely on traditional methods can be limiting.”
As per Agarwal, parametric insurance, with its swift payout mechanisms and data-driven models, offers a powerful tool to mitigate these risks.
The integration of parametric insurance with traditional risk management strategies reportedly offers a multi-faceted approach to enhancing resilience, such as mitigating disruptions, addressing infrastructure vulnerabilities, and navigating regulatory changes.
He went on, “Unlike traditional insurance, which reimburses based on actual losses, parametric insurance provides payouts based on predefined triggers. These triggers could be specific weather conditions, geographic events, or other quantifiable factors.
“This model allows for rapid financial support when issues arise, which is crucial in minimizing the impact of supply chain disruptions.”
Agarwal additionally underlined how integrating parametric insurance can significantly impact financial stability. Citing various studies, he explained that this approach can reduce the financial impact of disruptions by up to 30%.
“For instance, organizations using both traditional risk management and parametric insurance report faster recovery times and reduced operational downtime. In sectors like logistics, where operational interruptions can lead to substantial losses, this integration proves especially valuable,” Agarwal said.
WRMS’ co-founder concluded, “Combining parametric insurance with traditional risk management strategies provides a comprehensive framework for managing supply chain risks.
“By addressing disruptions, infrastructure vulnerabilities, and regulatory challenges through this integrated approach, we can enhance our resilience and operational stability.
“As the risk landscape continues to evolve, leveraging both strategies is essential for maintaining a competitive edge and ensuring long-term
