The Knowledge: Supply chains face geopolitical risk

The World Economic Forum’s (WEF’s) Global Risks report 2015 highlights how the growing interconnectedness of the global economy increases supply chain risk.

With international conflict topping the list of concerns, the report suggests the economic effects of any geopolitical conflict could disrupt the availability of goods or energy.

“Twenty-five years after the fall of the Berlin Wall, the world again faces the risk of major conflict between states,” said WEF lead economist Margareta Drzeniek-Hanouz.

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“Today, however, the means to wage such conflict, whether through cyber attack, competition for resources or sanctions and other economic tools, is broader than ever.”

The report questions whether many supply chains, in the quest for cost efficiencies and rapid flow of goods, are too lean.

“The global supply chains set up by multinational corporations are more efficient, but the complexity and fragility of their interlinkages make them vulnerable to systemic risks, causing major disruptions,” it noted.