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Putin, Ukraine and Supply Chains — Fragility, Resilience and Determination 

02/28/2022 By

It’s difficult to write this.

It feels like 1939 with uncanny echoes of Hitler invading Poland — and the former Soviet Union and Germany laying siege to Ukraine (and later the Russian Bear crushing all resistance to communism, claiming millions of lives in Ukraine and neighboring countries).

It seems too soon to write lessons learned while the lessons are still being taught and women, men and even children are fighting in the streets defending their country from invasion. And a dictator threatens his neighbors and the world with nuclear annihilation.

And we know these people, and so likely do you in this interconnected world. We hear them. We see them. We feel for them. They are in the right. They chose democracy. They jettisoned the nukes. They hoped for peace in the modern world.

But democracies are always teetering on a balance from those who would claim to seize power for the people.

When Benjamin Franklin was asked after a session of the Constitutional Convention about what kind of government the founding fathers had given to the country, he replied: “A democracy, if you can keep it.”

Supply chains and Franklin

There’s an eerie fragility and a comparability to supply chains as well. I can almost hear myself channelling Dr. Franklin: “Nice supply chain there buddy, if you can keep it. It’d be a shame if anything happens to it.”

Modern corporations and supply chain captains find themselves playing everyday whack-a-mole with supply chain risk while they seek to compete under normal circumstances, but asymmetric and interconnected risks lie all around — like Putin invading Ukraine.

Business and governments both need defense and resilience, as well as good governance to drive common purpose and an overall ‘system’ and supply chain that works. And where there is supply and spend, there is a need for procurement and supply chain professionals to keep everything running smoothly and effectively.

Business and government are strange bedfellows. Good governments can keep bad businesses in check. And good businesses should be able to either ignore bad governments, or, once an ecosystem of good businesses exists, even influence them to stay a given course that helps the citizens and population, rather than conscripting them to poverty and terror.

With Putin, unfortunately, we have a very bad government.

Miscalculating collective supply chain risks  

In business, we try to understand geopolitical risk and bake it into a supply risk map, but it’s often just treated as a cost of business, rather than a risk to our employees and partners. We also fail to fully consider the lessons of the past, which is why postmodernism and the rewriting of history is so dangerous — which leads us to do a poor job of scenario planning.

Granted, in Russia, the supply can be very cheap and the demand can be attractive. That is, if you know the right oligarchs. But for those who study geopolitics in addition to supply chain, there are so many risks on the risk profile, and you never know when that gray swan will turn black.

See below from the World Economic Forum Global Risk 2021 report:

“Infectious disease” lit up in ‘20/’21 … check

  • Putin is ringing the [deathly] bell for 2022 … check
  • Interstate conflict (even within the US) in 2021 and 2022 … check
source: WEF

(click to enlarge image)

And now, for your homework assignment, connect this to other risks on the map which are going yellow:

  • Cyberattacks? Check.
  • Information Infrastructure breakdown? Check
  • Food crisis? Check
  • Fiscal crisis (including inflation)? Check
  • Involuntary migration? Check

The challenge as business analysts is that we bounce around from risk to risk and don’t really think pragmatically about scenario plans and the intelligence of importance, even when it stares at you in the open like the last eight years of Vlad’s grievance tour of destruction and little forays and ‘nibbles.’

We are sick to our stomachs thinking about the poor young Ukrainian (and Russian) soldiers being sent to the slaughter house, and even more sick that we didn’t foresee it, scenario plan it, and have plans to pre-empt this.

And don’t blame Trump individually, or Biden, or the EU, or NATO — this is a collective failure to act. Now we’re sitting around watching the horror that we know is coming.

And here’s another dot on that risk map: Global Governance Failure? Triple Check.

The UN Security Council has Russia as its current head of the council — and with veto power.  So, “that dog ain’t gonna hunt.”

And the world’s collective poor decisions on diversifying energy AND aggressively supporting the push to renewables hasn’t helped because we’re failing on both fronts. In fact, some on our team argue that the push to green in Europe is at the very cause of this crisis.

A moment of truth …

… and for businesses, this is a moment of truth. Do you want to do business in Russia now? Do you want to source from Russia? If so, and there are no other options, can you do some good there? Either way, proceed with caution. Are you selling into or sourcing from Ukraine? We’re pulling for you, especially if you have your own staff there.

Businesses won’t end wars, especially in the short term. But they are ‘influencers’ and use that influence for good, i.e., band together to shore up governance (laws, regulations, standards, etc.) rather than just use it for lobbying, corruption and grift.

Public-private transparency and best practice (or at least good practice and lawful practice) is also key, which is what our former sister company, Public Spend Forum, and Peter Smith, our former UK Managing Director, are now doing on their own.

In the weeks to come, we will write more about supply risk and other practical lessons to consider, but also how technology is so important — especially cyber — but also IT risk management more broadly, including intelligence.

It starts with Transparency (and we’ll have a report out on that shortly) and then if that is tied to accountability and good governance and a brand commitment that aligns with modern day value, hopefully we’ll not just help make our value chains more resilient in the future, but maybe even help society itself be more transparent and ethically and socially responsible (which is not just about supporting CSR, but supporting democracy (small d) and capitalism collectively — which as China has taught us, are truly decoupled these days).

That’s the beauty of free markets. And procurement must be an evangelist for “scouting” and tapping [increasingly digital] supply market power and use that economic soft power to help influence hard power.

At the end of the day, it comes down to people, and right now, the only thing that seems truly relevant are the poor courageous Ukrainian heroes in the streets, and their families, and the Russian soldiers commandeered by an increasingly unhinged thug, and their families, and the Russian/Ukrainian citizenry (and the rest of the world) watching their own kin kill each other.

However, we can only control and convey our own humanity, and we hope to learn from you too about your thoughts on what’s happening right now. It’s hard to process it all, and it’d be nice to at least do it together, so that we can come together and help put this madness to an end.

But our lives must go on too, as it is our duty to use the lessons of the past to improve the future. If we sit idle, the gears of totalitarianism will win out.

We’ll be addressing future topics like those below on Spend Matters in the weeks and months to come:

  • Supply chain risk
  • Governance
  • Geo-political risk models and monitoring
  • Public-private partnerships and governance
  • Tying supply chain risk and other risks into strategic planning
  • Emerging tech for intelligence monitoring

As always, do not hesitate to reach out to us if you would like us to consider your companies, technologies or perspectives.

And in the meantime, please say a prayer for the people of Ukraine.

Jason (Founder)

Pierre (Managing Director)