Resilience360 Annual Risk report highlights top 10 risks for the new decade
With Trade sanctions, activism and ‘black swan’ events among the key risks in 2020 businesses must prepare to manage the unpredictable, especially in a highly connected world with integrated supply chains
The global economy is an elaborate system with many moving parts, including the flow of goods from one point of the globe to another. Yet no matter how seamless a business operation they may be, supply chains are vulnerable to every kind of environmental and manmade disruption – from extreme weather to policy obstacles.
Taking into account hundreds of thousands of events from across the world, The 2020 Resilience360 Annual Risk Report offers industry professionals insights into trends and risk that ensure decisions on risk mitigation, and supply chain management are as well-informed as possible.
Here are a few of the top 10 trends and threats for businesses to be aware of in 2020:
Economic sanctions as political tool
Toward the end of the last decade, governments were increasingly disposed to using economic sanctions in support of broader political objectives. With the start of the 2020s marked by unresolved disputes, it seems likely that such measures will be on the rise – which will put added pressure on supply chains to respond to new, as well as pre-existing, sanctions.
Though it is showing some signs of easing off, the U.S.-China trade war, for instance, could still produce a negative ripple effect, especially within global technology supply chains in future.
Neighboring Japan, meanwhile, has implemented tighter export controls on the three advanced materials required for the production of smartphones and semiconductors in South Korea. The stalemate proposed by this action means tech firms may need to establish contingency plans dealing with supply shortage and inflated prices, as such restrictions have already caused a marked decline in the production of memory chips.
The rise of environmental activism
Demands for more effective implementation of eco-friendly policy and business practice consequently led to more aggressive action directed at specific industries and transport hubs in 2019. Two incidents of targeted protests at London Heathrow Airport and the Houston Ship Channel in Texas were notable for two reasons: their immediate impact on carbon emissions-heavy industry sectors and the active media attention they generated.
It is predicted that such tactics could be employed again in 2020, with petrochemical and automobile among the potential target sectors, while heavy-industry manufacturing sites and crude oil shipping routes may also be in focus.
International summits such as the next meeting of United Nations Climate Summit from November 9-19 in 2020, in Glasgow, UK are like to be drivers for intensified protests.
Alternative trade routes: for better or worse
One of 2019’s biggest supply chain developments was the major investment channeled into new long-distance transport routes in sea and rail sectors. As a result of global warming, the sustained loss of sea ice in the Northern Artic has opened the possibilities for vessels in search of a more direct route from Asia to Europe.
Activity has quickly magnified: Compared to the previous year, this route saw a 60% rise in usage over 2019. Studies estimate a overall shipping activity in the Arctic will increase by more than 50% between 2012 and 2050, according to the European Federation for Transport and Environment. As more companies look to use this transport route, territorial disputes and possible environmental degradation may emerge as new threats.
Meanwhile, as part of the One Belt One Road initiative, on the railway tracks of China, a 10% investment increase over the previous year – a 2019 total of $119.38 bn (EUR 107.7 bn) – saw the healthy expansion of freight services to Europe. These new trade pathways are being promoted by the Chinese government as a way of streamlining logistics processes and reducing carbon emissions within large companies. Plans for 2020 include the development of new services between China, Ukraine, Azerbaijan and Georgia.
Black swan events loom in the shadows
While many supply chain risks and trends can be anticipated, certain ‘black swan’ events can be elusive to predict by nature. Extreme-impact, very low-probability catastrophic scenarios can not only create devastating crises but also pose serious disruptions to supply chain operations that can take months to recover from.
The most notable example is the COVID-19 novel coronavirus outbreak in early 2020 that has severely disrupted global supply chains through impeding air, ocean, and ground transportation routes, and triggered supply and labor shortages for key components due to government-mandated lockdowns and quarantines. While the outbreak of the novel coronavirus may have been impossible to predict, its unprecedented spread and the draconian measures required to contain it has demonstrated that once-in-a-decade disruptions are worth preparing for.
In this sense, black swan events can be the ultimate test of supply chain resiliency. Although no supply chain is completely immune from the impact of such crises, businesses will need to be proactive in managing the unpredictable, especially in a highly connected world with integrated supply chains.
To see the complete list of this year’s top 10 supply chain trends and risks, visit Resilience360.com to download your copy of the 2020 Resilience360 Annual Risk Report.
The Resilience360 Annual Risk Report webinar can be viewed here