Geopolitical Supply Chain Risk is Knocking on Your Door — Here’s What You Do

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Pop quiz, hotshot.

There's a bomb on a bus. Once the bus goes 50 miles an hour, the bomb is armed. If it drops below 50, it blows up. What do you do? What do you do?

For those of you too young to remember or too old to care, this quote from “Speed,” the summer blockbuster of 1994, delivered by Dennis Hopper’s character, pretty much sums it all up. (I admit, for this 11-year-old at the time, the adrenaline rush was palpable, and with no big Marvel-style special effects!)

In a different summer rife with risk — the one we’re in — the quote rings especially true. It seems on any given Tuesday, we’re faced with the threat of nuclear war between the United States and North Korea, transport vehicles continuing to become weaponized in public European places or even our guacamole ingredients being held up at the border.

Sigh. Everything seemed better in 1994.

But maybe that’s just because I was 11.

So what do you do when you’re a practitioner in a procurement position, tasked with synthesizing the myriad risks facing your organization’s supply chain — then deciding on your course of action?

Geopolitical Risk in Focus

In a recent paper in a series on risk, Spend Matters UK/Europe Managing Editor Peter Smith posits that wars and revolutions shouldn’t be the only risks considered when beginning to frame a geopolitical risk-mitigation strategy.

CLAIM YOUR FREE COPY: Geo-political Risk – An Informed Global View Is Essential: Supply Chain Risk Briefing (Part 5)

To the guacamole example above, “even the less dramatic can cause serious consequences for businesses, with major knock-on effects for customers,” Smith writes. “For instance, the current trend toward more protectionism could have an impact on tariffs and other barriers to trade, which could force a change in the shape of many global supply chains.”

Smith goes on to reference some interesting examples to make his point. Since we began this post by harking back to “Speed,” which centers on a weaponized city bus, Smith’s most interesting example may be how automotive OEMs such as BMW faced headaches in the aftermath of Egypt’s political turmoil precipitated by the Arab Spring. Due to the situation on the ground, the company was forced to suspend operations at various times between 2011 and 2014.

BMW likely has more than a few strategies in place when it comes to tackling geopolitical risk, but what about other organizations?

RapidRatings and ProcureCon Indirect East recently teamed up to conduct a risk-focused benchmark survey of 88 procurement executives, the results of which are published in a report titled “The State of Risk,” wrote Sydney Lazarus, editor at large of Spend Matters.

“The survey found that more than a third of the respondents experienced a ‘significant’ supply chain risk event in the past 24 months, negatively affecting revenue, reputation and production time,” Lazarus wrote. “Yet adoption rates for key elements of a solid risk management strategy, such as centers of excellence and supplier portals, remain at well below 50%, with 21% of the respondents reporting that they have none of the seven features the survey asked about.”

So How to Get Started?

First, when it comes to geopolitical risk, you must understand the types of consequences your organization faces, according to Smith, and how they overlap with other factors.

From the most obvious (supply interruption and by extension the loss of short-term sales and profit) to the slightly murkier (political, reputational and legal risk), only after taking stock of this gamut can one get to formulating an actionable way forward.

For suggested actions and mitigation strategies, download the full report for free.

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