Supply chain just got a bit riskier

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The impact of the UK’s Brexit vote has made itself felt in global supply chains as global supply chain risk hits a three year high in the third quarter of 2016.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

The CIPS Risk Index which is produced by Dun & Bradstreet, on behalf of the Chartered Institute of Procurement, grew for the fourth consecutive quarter, rising to 81.6 from 80.8 in in the second quarter.

In Western Europe, risk rose to 2.63 in Q3 from 2.60 in the previous quarter. The uncertainty around the post-Brexit relationship between the UK and the European Union has had a negative impact on trade and business sentiment in the UK and across the region. In the UK, the resulting currency volatility is having an immediate effect on British businesses with suppliers starting to push up prices in reaction to the weaker British pound. However, there has been a positive effect on exporters.

But, the survey reveals growing disillusionment with globalisation. It pointed out that political parties hostile to free trade are set to see gains over the next 12 months in France, Italy, Germany and The Netherlands.

It also pointed out that regardless of the result of the US election, both Donald Trump and Hilary Clinton have expressed concern about the Transatlantic Trade and Investment Partnership.

The survey highlighted the increase in risk in Eastern Europe, Central Asia, the Middle East and North Africa. It pointed out that civil war had all but eliminated international supply chains in certain countries. The one region to buck the trend is Asia Pacific, although it highlighted the fact that logistical routes have come under pressure.

No one is suggesting that supply chain professionals have much influence over many of the events that are pushing up supply chain risk, but the fact that the level of risk in mounting needs to be recognised and planned for.

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