Risk index at an 18 month low

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The news is full of conflict at the moment – conflict in Gaza, in Iraq and the Ukraine. And then there is the Ebola outbreak in West Africa. So it would be reasonable to assume that supply chain risk is increasing.

But the latest Risk Index from the Chartered Institute of Purchasing and Supply (CRI) dropped to an 18 month low in the second quarter.

The fall, from an all-time high of 82.4 in Q3 2013 to 78.1 in Q2 2014,  is in large part due to the German industrial recovery with the country’s exports shoring up supply chains across Europe and beyond, according to CIPS.

The importance of Germany in European manufacturing is highlighted by the fact that the UK imported more than £5.6bn worth of German goods and services last year, and German products also play a vital role in France, Ireland, the Netherlands and Italy who together supply a further £8.7bn worth of imports for the UK.

“First and foremost, British industry depends on a reliable supply of goods from around the world and from that perspective businesses are on a firmer footing than they were six months ago,”  says John Glen, CIPS economist and senior economics lecturer at Cranfield School of Management.

Nevertheless, it’s impossible to ignore the political unrest in the Middle East and the Ukraine, or the potential impact of Ebola. CIPS warns that these factors could reverse the improvement in supply chain risk in the third quarter.

To some, these will seem like far-away problems. Nevertheless, this is no time to put risk management on the back burner.

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