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How AI is building more resilient infrastructure supply chains

Leveraging data-driven insights from cutting-edge technologies, like Sentrisk, can provide a competitive advantage for companies by equipping them with the information they need for better decision-making and helping safeguard financial performance.

Companies involved in the development of infrastructure projects are increasingly turning to artificial intelligence (AI) models for productivity gains, benefiting from improvements in project design, schedule optimization, cost controls, site inspection, safety, compliance, and quality assurance. 

While these uses are gaining momentum and popularity, a less well-known but increasingly relevant application is how AI can help manage key supply chain risks, including structural, political, environmental, and credit risks.

Here, we show how stakeholders involved in the infrastructure development - from project owners to energy operators and private investors - can use AI tools to uncover, manage, report, and transfer risks. 

Today’s long, complex, and interconnected supply chains are increasingly exposed to issues - ranging from natural catastrophes to political risks - that could lead to significant and costly disruptions. And while most firms are aware of the vulnerability of their supply chains, they often lack visibility over the entire ecosystem, which can hinder them from identifying weaknesses and taking action to become more resilient.

But technology and cutting-edge, AI-powered platforms, such as Marsh McLennan’s Sentrisk, are redesigning the way businesses manage global supply chain risk. AI-derived insights can spark action, improve profitability, drive decarbonization efforts, and more across companies’ entire ecosystems.

As buildings soar to greater heights, get built faster, and rely on newer materials, structural risks associated with single points of failure or geographical concentration can impact project timelines and deliverables. Among their benefits, AI tools can assess the reliability of materials and suppliers, quantify structural risks more accurately, and identify potential vulnerabilities in the supply chain.

Scenario 1

Enhancing resilience against a single point of failure

An infrastructure project suffered severe delays when its single source for steel was unexpectedly shutdown due to flooding. This disruption affected the immediate availability of steel and cascaded through the supply chain, impacting subcontractors and labor schedules. The company running the project faced financial penalties, and the incident strained their relationship with the client.

To avoid repeating this experience, the company should seek to diversify its supplier base and establish contingency plans. With Sentrisk, the company can identify all steel suppliers with a high flood risk and ask these suppliers for specific flood contingency plans. This would enhance the company’s supply chain resilience to structural risks associated with single points of failure.

Today’s global business landscape requires organizations to stay informed about the political risks that may impact their operations, including how political instability, economic sanctions, or changes in trade policies may impact their supply chains. By quantifying these risks, organizations can develop contingency plans and diversify their sourcing strategies to minimize disruption.

Scenario 2

Informing a renewable energy company’s supplier strategy

A company building the infrastructure for an offshore wind farm wanted to import wind turbine components from a manufacturer in another country.

By analyzing ongoing financial news and political developments, Sentrisk can pinpoint potential disruptions with manufacturers that may impact their ability to supply a key component for wind turbine blades.

With the right delay in start-up coverage, the company will be able to mitigate losses from this unexpected turn and use data from Sentrisk to engage with suppliers to develop a mitigation plan.

Throughout the planning, processing, and coordinating of infrastructure projects, AI tools can help contractors identify and assess environmental, social, and governance (ESG) related risks. For example, Sentrisk can assess individual site-level, climate-related physical risk - such as sustained higher temperatures, sea level rise, and increased severity of hurricanes - and regional-level hazard exposure, in terms of susceptibility, coping, and adaptation measures. By assessing these risks, contractors can make informed decisions that enhance their reputation and comply with regulatory requirements.

Scenario 3

Geospatial analysis alerts company to deforestation risk

Regulators increasingly hold companies accountable for their entire business ecosystem, not just their production facilities. Infrastructure projects can use Sentrisk to better understand suppliers and risk exposure when reviewing their sustainability commitments.

For example, a company is importing wood from a country in Latin America. Sentrisk’s geospatial analysis can identify if their supplier is obtaining wood from a risky sourcing area, such as forests with a high deforestation rate. With this information, the company can seek alternative suppliers and continue to identify and monitor other high-risk areas and suppliers.

AI tools are transforming credit risk management, offering lenders more accurate insights, greater efficiencies, and the potential to boost profitability. Contractors can better manage their financial services with valuable insights into their portfolio risks, including stress-testing under different scenarios and making more informed decisions on supplier selection, pricing strategies, and contract terms.

Scenario 4

Demonstrating resilience to lenders

A lender seeks to reduce some of the risk involved in financing an infrastructure project to protect their cash flow and ensure the project’s viability.

Sentrisk’s deep-dive reports can detail the project’s supply chains and identify potential vulnerabilities. The reports can provide valuable insights into potential risks associated with their portfolio, helping the lender make an informed decision about their investment and develop an effective risk mitigation strategy.

While new technologies present the infrastructure industry with a range of transformative opportunities for enhanced business growth, operational efficiencies, and much more, they also introduce challenges and risks. The potential for inaccuracies in AI predictions and increased vulnerability to cybercrime require appropriate mitigation.  

Leveraging data-driven insights from cutting-edge technologies, like Sentrisk, can provide a competitive advantage for companies by equipping them with the information they need for better decision-making and helping safeguard financial performance. Companies should approach AI as a strategic imperative, not just an operational issue for mitigating risks and capitalizing on opportunities amid disruption.

For more information, please reach out to your local Marsh advisor

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