Geopolitical risks at highest level in three years causing ‘supply chain risk’

Geopolitical risks are at their highest level for three years, threatening widespread disruption to supply chains. "Political and economic uncertainties, such as the extent of the growth slowdown in China, emerging markets' financial vulnerabilities, the impact of terrorism on cross-border movements, and the fallout from Brexit, continue to weigh on global business sentiment,” warns Dun & Bradstreet’s Bodhi Ganguli. Dun & Bradstreet’s risk index rose to 80.8 for 2Q 2016, nearing the highest levels in two decades.

Brexit and Trump fears push supply chain risk index to three-year high

Geopolitical risks have spiked to their highest level for three years, threatening to cause widespread disruption for firms that ship goods and people around the world.

A quarterly monitor of "supply chain risk", which charts the potential for economic and political threats to upset worldwide trade, has climbed off the back of the UK's vote to leave the EU and the possibility of Donald Trump sweeping to victory in November's US presidential election.

The risk index, compiled by economists at Dun & Bradstreet for the Chartered Institute of Procurement and Supply (CIPS), rose from 79.8 to 80.8 in the second quarter of the year, nearing its highest levels in two decades. The index was already in the "high risk" zone off the back of weak commodity prices and widespread threat of terrorism.

Bodhi Ganguli, lead economist at Dun & Bradstreet said: "The global operating environment remains high risk reflecting the slowdown in emerging markets and the failure of developed economies to embark on a robust recovery.

Read more: Political threats could hit fragile global growth

"Political and economic uncertainties, such as as the extent of the growth slowdown in China, emerging markets' financial vulnerabilities, the impact of terrorism on cross-border movements, and the fallout from Brexit, continue to weigh on global business sentiment."

The only area around the world found to be less risky than it was three months ago was the middle east and north Africa, as a rise in commodity prices since the beginning of the year has helped to weaken some of the economic problems in the region. North America, west Europe, Asia-Pacific and Latin America had all become more dangerous places for companies to operate on a combination of heightened political, security and economic threats.

From a practical point of vew, Jon Glen, economist at CIPS said Brexit "could lead to some of the most dramatic shifts and severe implications for global supply chains in the coming years … The confusion and uncertainty surrounding the current situation has already driven supply chain risk to a worryingly high level."

The report added: "At a global level, the Brexit vote underlines concerns about a wider shift towards protectionism in global trade policy," which threatens to make life even harder for importers and exporters.