Thursday 25th Apr 2019 - Logistics & Supply Chain

International supply chains face intensifying volatility

International supply chains face intensifying volatility in 2012, driven from above by political instability and economic uncertainty, and from below by social protest and increasing scrutiny of corporate practices, according to consultancy Control Risks.

Launching RiskMap 2012, its annual review and forecast of business risk for the year ahead, chief executive Richard Fenning highlighted three areas of risk:

* The growing significance of cyber and information security threats, arising from both criminal and ‘hacktivist’ groups, as well as the security and integrity challenges presented by pervasive online social media, which include data theft, fraud and reputational damage

* Rising prospects of government intervention in business through changes in regulation, tax policy or contracts, driven by mounting public hostility towards companies and investors as well as fiscal pressures

* Increased labour unrest stemming from trade unions battling wage and benefit cuts, as well as low income workers – especially in emerging markets – pressing for better conditions, labour rights and personal dignity

Control risk identified five countries worth watching:

Bulgaria: Against the backdrop of financial uncertainty in more profligate EU member states, Bulgaria, with an expected 2011 budget deficit at 2.5 per cent of GDP and public debt at 17.5 per cent, clearly stands out. Although companies will need to take adequate measures to protect against risks stemming from pervasive corruption and organised crime, the country’s relative fiscal and political stability, coupled with strong links to the EU, Russia, and Turkey, make it an attractive, albeit understated, investment destination in 2012.

Colombia: Although security concerns persist, leftist guerrillas are on the back foot and security gains continue to open up new areas for extractive development. In 2011 the country won back its investment grade rating, while a long-delayed free trade agreement with the US will come into force in 2012, and President Santos continues to enjoy an overwhelming legislative majority.

Libya: Over the coming years Libya will be able to finance wide-ranging reconstruction through sovereign wealth and oil revenues, providing substantial commercial opportunities across a range of sectors. While conducting business will undoubtedly remain complex with a legacy of corruption and inefficient bureaucracy complicated by emerging political risks, there is nonetheless significant potential for investors.

Mozambique: Mozambique’s stable political environment has encouraged a boom in offshore petroleum exploration where investors have been rewarded by significant discoveries of natural gas reserves. The development of a transport corridor to South Africa has also facilitated the development of the country’s nascent mining sector and existing infrastructure shortfalls – a legacy of years of civil conflict – present ample opportunities for investors.

Sri Lanka: Despite international criticism of the civil war against the LTTE, the Sri Lankan government’s tight control of the security situation has made the island much safer. With recent offshore gas finds there will be renewed interest from foreign companies in licenses of oil and gas concessions in the Mannar Basin, expected in early 2012. Long term opportunities in delivering hydro power exist though the possibilities of other nations’ firms contributing in the thermal power sector is limited by India and China’s presence on the island.


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