Crisis in Catalonia – the Supply Chain Risk Perspective

There are many implications and issues around the events in Catalonia, with the government there declaring independence from Spain. That was rapidly followed by the suspension of the regional government by the national political leadership in Madrid.

While the Catalonian leadership says that the controversial referendum held in September gives them a mandate for change, with 90% in favour, only 43% of Catalonians voted in that and it is clear many in the region do not want a full split. The central government in Madrid has ordered that fresh elections for the regional parliament of Catalonia should take place in December- so what next for Spain?

We don’t know. But with our focus on supply chain risk, we can make some comments on that issue as something we’re most competent to discuss here. What are the issues that procurement and supply chain executives should be considering as the crisis in Spain deepens?

First of all, we should consider the wider European impact of this. We might expect to see the Euro weaken in the currency markets if things get really nasty, although we suspect the impact will be limited as Spain, although significant, still represents only around 10% of Eurozone GDP (Germany is over 25% by comparison). But uncertainly among corporates might affect investment plans, and combined with Brexit could generally increase economic unease across the continent.

Then we have the more specific risk issues for Spain. The most obvious and frightening is the prospect of full-scale civil war. Even if this seems unlikely, some sort of civil unrest, increasing terrorism, or perhaps rule backed by force in Catalonia are far from impossible to contemplate. All of this could clearly have an effect on businesses based in Catalonia and even elsewhere in Spain. Strikes for instance could have a real impact on supply from the region.

As well as business based in Catalonia, Barcelona is Spain’s third-largest port and the ninth-largest container port in Europe. It may seem unlikely to affect businesses in northern Europe, but sometimes there are unforeseen consequences as disruption in one centre ripples outwards.

In some industries certainly, there are also potential regulatory issues. If Catalonia really was “independent”, issues such as whether banking licences or other certifications might still apply across the rest of Europe would come into play. Remember, an independent Catalonia, like an independent Scotland (as we learnt during that referendum) would not automatically be a member of the EU.

We have already seen Catalan bank Sabadell - owner of Britain's TSB – transferring its registered offices out of Barcelona to Alicante in southern Spain "to protect the interests of our customers, shareholders and employees".

People come into the equation as well of course. International businesses will be concerned about their staff in Spain and particularly in Catalonia we suspect, and there may be questions about the wisdom of traveling to Barcelona in the current situation. Unless you are very peculiar, you don’t want to fly into a riot.

So the most immediate advice for procurement and supply chain people? Most importantly, make sure you have that understanding of where your key suppliers are based and identify any potential issues with Catalonia-based firms or supplying premises. Then look for mitigating actions (such as alternative supply sources) where you see critical supply issues. Take a look at your key shipping routes, and at the moment, I would be saying “no staff travel to Catalonia” unless it is absolutely essential.

PS. Don't forget you can still access our recent webinar on "unforeseen supply chain risks" here.

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