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Top 3 Risks in Logistics and Supply Chain Risk Management


white trucks parked at depot

Risk management is extremely important now as it has been in the past, but global changes have put a lot of pressure on supply chains that require the skills of a risk management professional to analyse and mitigate. In logistics and supply chain risk management, traditional risks have always existed since day one. Upstream and downstream risks, maintaining optimal inventories, choosing reputable logistics providers, and many other risks have always been and will likely continue to be significant risks worthy of managing. Below are three of the big risks that supply management professionals must adapt to:

Post-Covid Supply Chain Aftermath

While Covid-19 may not have directly interfered with global supply chains, the effects of government-imposed lockdowns certainly have hampered what seemed to have been an increasingly globalised world economy. Even as most countries have eased lockdowns and trade and travel have resumed, events during the pandemic years have lingered, only to showcase how truly fragile global supply chains can be.

Take, for instance, the Ever Given container ship that blocked the Suez Canal in March 2021. It has been estimated that around US$9.6 billion (about $14.13 billion AUD) in trade value was blocked in the course of nearly a full week.

There have also been worries of a global computer chip shortage starting in 2020, persisting to the present day. Since computer chips are used in just about all electronic devices and modern cars, the impacts have been felt globally.

Perhaps more than ever before, C-suite executives must be cautious and vigilant with the supply chains, making them as agile and resilient as possible to mitigate these types of risks.

Political Risks to Supply Chains

The overall political landscape is ever-changing, but it seems to be happening at a mile a minute in recent years. The Russia-Ukraine conflict and ongoing energy crisis in Europe are already having impacts on supply chains.

Trade relations with China have also become a challenge due to ongoing political disputes as well as internal attempts to fulfil a zero-Covid policy in China, which has repeatedly led to major port cities ceasing operations. Considering the massive amounts of suppliers that modern organisations have had from China, any changes to the political landscape can pose a significant risk to organisations that have put all their eggs in one basket, so to speak.

Economic Risks to Supply Chains

In terms of economic risks, supply chains have become fragile for the reasons mentioned above but also due to challenging economic times in Australia and elsewhere around the world. Rising rates of inflation have tightened spending, thus reducing demand for many goods and services. Simultaneously, rapid rises in inflation create instability in forging long-term contracts with suppliers. Commodity prices are always in flux, but drastic uncertainty in the long-term can cause many businesses to avoid taking on the risk of locking in ongoing contracts as a consequence.

Moreover, the Covid-19 lockdowns implemented by many governments have had lingering effects on small businesses as well as many suppliers. Those that lacked the capital to withstand full closure for months at a time simply had no option but to declare bankruptcy, thus limiting the pool of potential suppliers for a specific product.


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