How Telecommunications Businesses Manage Semiconductor Risks

Semiconductors’ conductivity may be the key to telecommunications network efficiency, but their potential for scarcity and vulnerabilities threatens operations, connectivity and infrastructure.

"To navigate semiconductor risks, telecom company risk managers need to chart a course through three treacherous currents. These are supply chain, cybersecurity and increasing adverse weather," said Maryam Ouji, Telecommunications Lead at Travelers Technology & Life Sciences.

Supply chain disruption: Test business continuity plans

A perfect storm of increasing global chip demand, geopolitical tensions and the potential for adverse weather has created volatile supply chains and potential shortages of advanced chips. Network equipment (such as routers and base stations) and fiber optic technologies, along with the deployment of modern technology such as 5G and/or decentralization of networking, rely heavily on specific chips. This makes them vulnerable to supply chain disruptions. An unexpected disruption could delay network upgrades and deployments, leading to contractual penalties, brand damage and stalled expansion plans.

Mitigation

Develop a predefined, well-documented and tested business continuity plan that clearly communicates how to respond during a disruptive event.

Coverage

Evaluate business interruption and contingent business interruption coverage needs.

Cybersecurity: Balance security and trust

Increasingly sophisticated cyberattacks raise concerns about vulnerabilities within specific chips where “backdoors” embedded during manufacturing might compromise network security.¹

Mitigation

• Invest in cybersecurity: Robust network encryption, vulnerability assessments and penetration testing are important to help identify and eliminate potential weaknesses.
• Adopting Travelers’ five cyber readiness practices can help to protect sensitive data, reputation and operations:
  • Practice 1: Add multifactor authentication (MFA).
  • Practice 2: Update your systems.
  • Practice 3: Implement endpoint detection and response (EDR).
  • Practice 4: Have an incident response (IR) plan.
  • Practice 5: Regularly back up your data.

Coverage

CyberRisk Tech from Travelers is a flexible modular approach to providing cybersecurity coverage that is both broad and flexible enough to meet the complex needs of today’s state-of-the-art telecommunications companies.

Chip reliant infrastructure: Adapt to changing weather patterns

Damage to towers and cables by wildfires, hurricanes and other natural disasters can lead to service disruptions and potentially hefty repair costs. Terrestrial infrastructure increasingly relies on smart technologies and specialized chips for weather monitoring and network resilience. Disruptions from these chips can exacerbate damage and hinder recovery efforts.

Mitigation

• Weather-resistant infrastructure: Investing in upkeep, repair and maintenance of towers, cables and equipment designed to withstand harsh weather conditions can help minimize damage.
• Geographic diversification: Distributing network assets across diverse locations may help reduce the impact of localized extreme events.
• Disaster recovery plans: Comprehensive plans for rapid network restoration and service resumption following natural disasters help ensure a quicker recovery.

Coverage

Property insurance: Broad property and business interruption insurance.

By understanding the critical role of semiconductors, implementing risk mitigation strategies and leveraging appropriate insurance solutions, telecom risk managers can navigate the complex landscape of chip vulnerabilities and ensure a more secure, reliable and resilient connected future.

Learn more about Telecommunications Insurance from Travelers or reach out to a Travelers representative.

Source
¹ https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-161r1.pdf