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Managing Risk in a Volatile World: Insights for Shipping and Logistics Firms

The international trade landscape is becoming increasingly complex and volatile, with factors such as slowing output, persistent inflation, and geopolitical tensions contributing to a challenging credit risk environment. For shipping and logistics firms, managing these risks is crucial to maintaining smooth operations and ensuring business continuity.

Managing Risk in a Volatile World: Insights for Shipping and Logistics Firms
Phlo Systems

The Changing Terrain of Supply Chain Risks

Back in the day, supply chain risks were easily classified into four categories: production delays, natural disasters, supplier failures, and the sporadic “black swan” incident. But this scene has changed dramatically as a result of the pandemic. Supply chain risks can take many different forms nowadays, such as quality problems, fluctuating economic conditions, labor shortages, geopolitical unrest, cybersecurity threats, and changing consumer preferences.

Companies' top concerns, according to Everstream Analytics' 2024 Supply Chain Risk Report, are extreme weather, new environmental laws, and protectionist policies, particularly those involving China and the United States. Leaders in the supply chain are also concerned about shortages of agricultural commodities and international conflicts. Logistics managers now prioritize rising cybersecurity concerns, drought conditions in the Panama Canal, and recent attacks on ships in the Red Sea.

Geopolitical Risks and Their Impact on Supply Chains

Key Geopolitical Factors

  • US-China Tensions: Trade disputes and political frictions.

  • Russia-Ukraine Conflict: Disruptions affecting supply routes.

  • Regional Instabilities: Market volatility in Asia Pacific, leadership changes, and election outcomes.

Responding to Geopolitical Challenges

To navigate these geopolitical challenges, companies must:

  • Stay close to their supply chains and customer bases.

  • Enhance the availability and quality of data.

  • Monitor real-time insights to anticipate potential disruptions.

The Role of Technology in Risk Management

Real-Time Data Analysis

Real-time data analysis plays a crucial role in risk management by providing businesses with up-to-date insights into their financial health. Unlike traditional credit risk assessments that rely on outdated financial reports, real-time data allows companies to make informed decisions quickly, identify potential risks promptly, and take proactive measures. This dynamic approach enhances a company's ability to manage risks effectively, ensuring stability and fostering growth by staying ahead of market fluctuations and unexpected financial challenges.

Proactive Risk Management

The growing emphasis on labor and demand management, both of which are becoming increasingly challenging. Companies are turning to technology to address these issues. For example, platforms like ops Phlo help organizations monitor supply cha