10 risks to global supply chains in 2020
US, WASHINGTON (ORDO NEWS) — For pretty much every business that manufactures products, it is very important for them to learn how to mitigate risk in supply chain because each disruption to the supply chain causes delays, more costs, etc. So, it’s important for them to identify what risks are more prevalent to their business and work to reduce them. Resilience 36 experts published their 2020 Annual Risk Report, in which they analyzed the key risks that supply chains face, as well as emerging trends.
99% of the organizations surveyed as a result of the study noted the disruptions and difficulties they encountered over the past five years. And taking into account the epidemic of coronavirus, their share will soon grow to 100%.
Below we describe the key risks for the supply chain this year.
1. The threat of cyber attacks
In today’s world, when data is of particular value, 68% of companies are confident that cybersecurity is at risk.
According to experts, by 2021, the damage from cyber attacks will reach $ 6 trillion a year. This will have a negative impact on supply chains, production, logistics companies and engineering companies.
2. Trade Policy Changes
Uncertainty surrounding a series of agreements and negotiations on cooperation and trade could become a significant negative factor in 2020. It will also have a negative impact on the supply chain, and also slow down the decision-making process for many companies and organizations.
The main factors include trade relations between the United States and China, the British exit from the EU and subsequent negotiations on trade relations, negotiations on tariff reductions and standardization of customs rules in Asian countries and several others.
3. The growth of economic sanctions
In 2019, many countries announced tougher international policies and sanctions. So, US President Donald Trump has threatened Mexico to introduce a 5% tariff on the import of all goods in order to combat illegal immigration. Despite the fact that this threat has not been fulfilled, many supply chains are adapting to new conditions and are keenly reacting to such statements.
Japan introduced an export control mechanism for three chemicals that are important for the production of smartphones and semiconductor products in South Korea. These are hydrogen fluoride, photoresist and fluorinated polyimide.
If the trend continues, then companies will have to look for other suppliers.
4. Protests and strikes
Strikes and protests against economic and social injustice have a serious negative impact on supply chains. First of all, this concerns interruptions in the work of the infrastructure. So, in 2019, workers at one of the General Motors factories staged a major strike. In total, 50 thousand people took part in it. The damage to the company amounted to more than $ 1 billion.
In Mexico, a teacher union blockaded the railway, demanding payment of salary arrears. The strike lasted 31 days and cost the budget $ 736 million.
Protests and strikes were also in other countries of the world – Colombia, Chile, Bolivia. All of them led to serious economic damage.
5. Delays at the border
Some countries have introduced stricter border controls to limit illegal immigration. Some checkpoints are generally closed, some introduce additional control measures.
This can lead to a delay in goods at the border, which is especially important for the smooth operation of Supply Chain, especially the supply of goods for which a certain transportation period must be adhered to.
If this trend continues in 2020, companies will have to look for alternative supply routes to avoid delays at the border.
6. Environmental protection
In 2019, large-scale protests and other events dedicated to the protection of the environment took place. So, on September 20, the largest environmental strike took place, during which 2,500 events were held in 163 countries of the world.
Some environmental organizations target companies and transportation hubs deliberately, resulting in delays.
7. New environmental legislation
The desire of national governments and company executives to reduce air pollution is leading to ever-increasing efforts around the world. This is especially true for the Asia-Pacific region, where authorities are seeking to reduce air pollution without slowing economic growth.
Thus, in Thailand, 600 enterprises were temporarily closed in February and the number of operations at 1,500 Bangkok enterprises was reduced. Thus, the authorities are trying to reduce the amount of smog in the city.
China has also introduced a number of requirements to reduce harmful emissions.
8. Oil prices
The collapse in the oil market will play a negative role for global supply chains, many analysts are sure.
So, at the current price of oil, producers are forced to reduce production costs, which will lead to a review of the portfolios of many companies, which can lead to both the closure of oil refineries and the revision of supply costs.
9. Drug smuggling
Shipping companies are facing a high increase in drug smuggling during container shipping. In 2019, drugs were discovered in Germany, the UK, the Netherlands, Spain and Greece. A large batch of drugs (2 tons) was found in containers that arrived in the United States.
Penalties for illegal drug trafficking in the US are up to $ 50 million. Not surprisingly, many shipping and transport companies are concerned about this issue. In addition to fines, they face delays at the border.
10. Coronavirus pandemic
Companies and organizations can build clear strategies to avoid many risks. However, there is always room for black swans in the world – unexpected, unpredictable events that affect markets.
So, in 2020, the coronavirus pandemic became such an event, which led to negative consequences for almost all sectors of the economy, which affected many countries of the world.
Cities are closing down, routes are shutting down, infrastructure is shutting down, people are being quarantined, enterprises are shutting down.
All this has a very negative impact on the supply chain.
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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.