New governments and policy changes can have a domino effect that poses challenges to the supply chain. The U.S.-China trade dispute is just one example of policy change that may dramatically increase risks if companies relocate manufacturing operations to Africa. Revision of security criteria for organizations that receive trade benefits under the Customs Trade Partnership Against Terrorism (CTPAT) is another, while new governments in Brazil, elections in India, and the mess that is Brexit can all affect supply.
A recent report from BSI identifies five major themes that will impact the supply chain in 2019:
- Revision of the Minimum Security Criteria under the US Border Protection’s CTPAT
- Supply chain growth in Africa increasing exposure to varying risks
- Ongoing mass migration posing both security and corporate social responsibility risks
- Dramatic shifts in politics including those in Brazil, the US-China trade dispute, and uncertainty over Britain’s departure from the European Union
- The continued threat to supply chains posed by cybersecurity issues
“Increased exposure to labor exploitation, terrorism, corruption and natural disasters must be a consideration for companies making changes to their supply chain, and best practices must be maintained in order to prevent threats to business continuity or corporate social responsibility,” said Jim Yarbrough, Global Intellgence Program Manager at BSI.
The company also identified several key trends in supply chain risk from 2018:
- Food and beverage remains the top commodity stolen
- Metal has now entered the top five commodities stolen worldwide
- Poor working conditions led as the top labor violation recorded last year
- Labor strikes most frequently disrupted manufacturing operations
CTPAT Minimum Security Criteria
Within the United States, companies enjoying trade benefits under CTPAT will soon need to meet new criteria for certification in order to meet the evolving risks of today’s operational environment. As the revised criteria for CTPAT are unveiled, companies will need to undertake new efforts to achieve supply chain security and mitigate emerging risks.
Exposure to varying risks in Africa
The potential for increasing movement of supply chains to Africa, where labor costs are lower and shipping to the US or Europe is cheaper, can be cost-effective. But the risk of terrorism in African countries, where 23% of all supply chain terror incidents take place, sets the operational environment apart from that of Asia. Companies whose supply chain moves to Africa must be wary of this increased risk, often compounded by corruption among security and customs personnel.
Migration continues to pose a risk
An increase in stowaway and labor exploitation risks stemming from migrants traveling along three major flows: Central to North America, Intra Southeast Asia, and Africa and the Middle East to Europe. Regression in countries such as Brazil—where budget cuts are reducing the resources available to carry out inspections—could increase the risk of migrant labor exploitation.
Dramatic policy shifts
Recent shifts in political ideology in the governments of Brazil, Mexico, the United Kingdom, India, and the United States are setting the stage for an eventful 2019. Brazil’s newly elected president has implemented policies that may pose corporate social responsibility risks for some industries operating in that country, particularly in relation to the rights of workers, the LGBTQ community, and indigenous territories. Mexico’s president is undertaking new initiatives to curtail corruption, but security challenges will continue to affect businesses in the coming year, particularly in-transit cargo theft. The US-China trade dispute has raised new concerns related to intellectual property protections and the relocation of relevant facilities for a host of businesses. However, companies looking to other Southeast Asian countries should weigh the costs of tariffs against the cost of increased risks to their supply chains, including exposure to child labor, forced labor, and natural disasters. The outcome of negotiations on Brexit remains unclear, creating ripples of uncertainty through supply chains operating within and through the United Kingdom and the European Union, while India’s ongoing elections in April and May could create a shift in politics with effects on global supply chains. Workers’ dislike of many recent policies, with strikes over low wages and fuel prices, could cause immediate disruption and longer-term changes.
Within this new global landscape, cybersecurity stands as an overarching and multi-faceted struggle for all parties throughout the supply chain. Securing data and facilities in a fast-paced and modular world connected by the Internet of Things is an emerging challenge that all supply chain professionals undertook in 2018 and will continue to grapple with in 2019.
To download a copy of BSI’s Supply Chain Risk Insights Report, click here.