This week has not been a good for the Russian currency, as it has dropped close to 20% versus the US Dollar. Some analyst fear that the Putin and Russia will default on their debt and this might throw the global economy into a tail spin. The impact could have graver consequences in places such as Ukraine – where Russia has already acted belligerently this year – in Eastern Europe or the Baltics. It is not simply the Russian ruble that should enter our thinking process for our supply chains – look at what is happening this week in Belgium as well. As union workers have gone on strike, halting ports, airports and highways it has brought much of Belgium to a halt.
But this is not meant to be a post about geo-politics and world history, although those are the areas of my early formal training. What the issues in Russia and Belgium remind us, especially those of us in the supply chain space, is that we do not operate in a vacuum. I realize that I am stating the obvious, but at times I am surprised at how many turn a blind or an ignorant eye when it comes to global events. There have been and will continue to be articles and studies done on risk management. Something that is crucial for our supply chains. However
one aspect that remains missing from these conversations is how to account for these global events. Much thinking has been done around assessing risk for suppliers, customers, geography, transportation, raw material costs, weather and natural disruptions to name a few. Yet it remains difficult to quantify geo-political risk. In other disciplines this has been marginally tackled, but for supply chains it still takes a back seat.
When it comes to assessing our supply chain risks we need look to an index that looks at a number of geo-political aspects. A combination of credit rating, political stability, regional history, religious tension, border fluctuation, socioeconomic make up, relationship with neighboring nations to name a few, could make up a supply chain exposure and risk indices that would compliment the other data points we study.
Companies, such as General Electric, have chief economists on their executive committee, this is should be a role all businesses that are international and that have extended supply chains have – which means 99% of companies. But let us not limit ourselves to economists…as a political scientist at heart…I would argue corporations need to also look to have geo-politically focused assets at their disposal. Our supply chains touch all the four corners of the globe, if we do not have the assets in place to provide better insight into the impact history and politics have on the geographies, we risk exposing our supply chains to a greater array of disruptions.