Global events—from geopolitical tensions to cyber events—can shake even the strongest supply chains. In this Supply Chain Byte, Lisa Anderson, President of LMA Consulting Group, shares why leaders must actively monitor risk at every point in their global supply chain and take steps to proactively prepare for disruption. If you’re still managing risk reactively, this is your wake-up call.

According to a WTW Global Risk Survey, 63% of organizations experienced greater than expected supply chain losses despite enhanced risk management efforts. 55% rated geopolitical risk as a top concern. Although not surprising with the Russia-Ukraine war, the invasion of Israel, the Houthi rebels attacking ships in the Suez Canal, the China-Taiwan tensions, and the China-Philippine tensions, that is a staggering number as these topics make their way into boardrooms. Data security jumped to 47%. Look no further than the Salt Typhoon and the rise in cyberattacks of infrastructure and telecommunications. For example, recent reports show that 35,000 solar power systems are vulnerable and exposed to internet-based attack across 42 vendors. With the recent events in Israel and Iran, these vulnerabilities must be taken seriously. Lastly, < 8% of companies believe they have complete control of their supply chain. These statistics show reason to be concerned as you are only as strong as your weakest link in your supply chain.

Why should we focus on global risk? The successful companies and countries will lead the way in the following fields in the next decade:

• Artificial intelligence: AI will drive growth and success. The rest will not be able to keep up. It is similar to running behind the first automobile in a horse drawn buggy.
• Need for energy: Not only does AI require a tremendous amount of energy that is increasing far beyond availability, but energy drives manufacturing, logistics, and powers homes and businesses. Review our recent Supply Chain Byte on the value of energy.
• Critical industries: Medical, pharmaceutical, defense & technology industries rely on critical minerals.

Critical minerals and rare earths are required to support all of the above and is the #1 risk. China currently dominates as they produce 60% of rare earths and critical minerals and process 85% of the world’s requirements. As a response to the tariffs, China put rare earth shipments on hold. This situation is unacceptable. Smart and proactive companies and countries will immerse themselves in mitigating this risk. Putting the best and brightest on the issue will lead to innovations, new developments, and a rapid expansion of capabilities across the globe. 

What should companies do? 

• Assess risk: Assess your end-to-end supply chains for risks and vulnerabilities. Not only must you know who you are depending on in your end-to-end supply chain, you need to know who they are depending on. Triage your risk and start acting. Read more about assessing and addressing risks and vulnerabilities with our article on supply chain volatility and vulnerabilities. 
• Evaluate true partners: If you are only as strong as your weakest link in your supply chain, you must vet your critical suppliers and their supply chain partners. Be deliberate about the organizations you and your customers will depend upon.
• Investing in & shoring end-to-end supply chains: It will no longer be easy (not that it ever was, but it might feel so when you look back in a few years). Allocate capital to invest smartly. The successful companies will invest when everyone else panics, yet they’ll invest smartly. Take prudent risks, hire the best talent, and jump in the deep end of your area of expertise. 

If you are interested in reading more on this topic:
Cyber & Geopolitical Risks Spurring Supply Chain Changes & Upgrades