Some thoughts from Howden on the current situation and the outlook for the next year or so, as various war related consequences start to affect various sectors of the global economy;
Geopolitical events over the past few years have given senior leaders, risk and resilience managers much practice in understanding how best to respond to such challenges. However, this landscape is constantly shifting and each new conflict adds a layer of complexity to an already full agenda.
Just as some organisations say, “oh we don’t need a crisis management or business continuity plan, we managed the pandemic well”, or they may feel they’ve been relatively untouched by previous conflicts, and they’ll manage without considering implications of the current situation unfolding across the Middle East.
However, this latest conflict is already causing ripples far beyond the initial people related risks and organisations who have not considered how they might be impacted are already at risk of being exposed.
The obvious risks include:
- Supply chain disruption
- The potential for increased inflation
The supply chain – so what?
While your organisation might not be directly impacted, your critical suppliers could be.
Early news reports suggest that India, Asia and the UK could be significantly impacted as they rely heavily on energy imports. Rising costs in these regions and potentially higher interest rates mean that those costs may be passed on to you if you have supply chain dependencies based in these regions.
Reviewing your supply chains, including understanding your suppliers’ key dependencies from a deeper perspective, means you can start to understand how such risks could manifest in your organisation.
Consider, at what point could you no longer afford to continue purchasing critical products or services? What is the impact on our own critical products and services?
What can I do now about my supply chain risks?
If you’ve not already mapped your critical suppliers against your key activities, then start this process now. Think about:
- What providers supply to you that enable you to continue to operate.
- Could you find an alternative supplier for these services?
- What are your suppliers’ key dependencies – who do they rely upon to provide their service to you.
- Are there any contingency measures you can put in place should your supplier not be able to meet your needs? What if they fail?
· At what point does the cost become too high for your organisation?
You may have done some of this thinking during the pandemic, or in earlier geopolitical conflicts; it’s time to revisit these questions and focus through the lens of this latest disruption.
What about other risks because of the conflict?
Depending on the size, nature and complexity of your organisation, you may be more directly impacted. You may have people or sites located in in the disrupted regions.
Ideally, you will have already considered how you will manage such a crisis in your resilience related plans. If not, or if you need a reminder of the areas you might need to consider, we’ve created a general checklist to guide you through some of the key areas to consider.
For organisations not immediately or directly impacted, it will serve as a prompt to consider acting early and preparing and testing response measures.
“Geopolitical risk is rapidly evolving and changing and organisations of all types need to consider what this could mean to their operations.” said Grant Foster, Risk Advisory Leader at Howden Risk Advisory. “While it may be obvious for organisations directly impacted, every organisation should make the time to consider how geopolitical risks and tensions could impact their operations and prepare accordingly.”
Boards and senior leaders should consider discussing to understand how they could be impacted. Whilst risk and resilience professionals should look at their response plans, processes and other risk mitigation measures and consider what changes might be needed to ensure preparedness.
Procurement professionals should work alongside these colleagues to help their organisation interrogate their supply chains so they can understand where the key risks are and aim to manage these challenges appropriately.
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