The impact of supply chain shocks on businesses’ ability to trade internationally is diminishing due to greater forward planning and risk mitigation.
That was the consensus among supply chain experts at a Global Trade Live webinar about the disruption caused by conflicts in the Middle East this year.
Marco Forgione, director general at the Chartered Institute, stressed that the situation in the Middle East – along with other shocks such as the war in Ukraine, the pandemic and Donald Trump’s ‘America First’ policies – represented a “new norm” of uncertainty, and that this paradigm is unlikely to shift in the near future.
Risk mitigation reduces impact of shocks
Global Trade Live delegates confirmed Forgione’s insight that supply chain shocks are now part and parcel of business planning, with 44% now factoring them into their trade strategies.
Businesses must adapt, be resilient and be ready to face instability to remain competitive, Forgione said.
However, he added that the most recent closures of the Strait of Hormuz were having “less impact on international markets”.
“The oil price rose to $80 following the latest closure, but this is far lower than the $120 seen when the war started.”
Lessons learned
Ross Jones, head of commercial UK at Aramex, discussed how the Gulf authorities helped businesses move goods during the crisis. Alternative solutions were offered, supported by “human effort and rapid responses”.
For Jones, a key lesson from this year’s crisis is that businesses should look for other sourcing options and have alternative supply solutions.
Ilona Kawka, imports advisory lead at the Chartered Institute, affirmed that “route diversification is one solution to avoid disruption”.
Using digital tools “to perform risk intelligence and monitor the global situation” can also help businesses face disruption by mapping supply chains, reducing volumes or changing arrangements. Kawka also mentioned that financial reserves are also essential to face these potential challenges.
Victoria Boldison, founder and CEO of Bolst Global, also highlighted how quickly Gulf countries responded and found solutions for businesses. She said that companies already trading in the Middle East have found ways to continue supplying their products through alternative routes, while companies not yet in the region but trying to enter were more affected.
Not all the countries in the region were impacted in the same way. Saudi Arabia, for instance, with its access to the Red Sea and its port in Jeddah, “was largely unaffected compared with the rest of the GCC states”, she said.
UK-GCC FTA
Despite the current crisis, the region remains a key partner for UK businesses. There are “huge opportunities and great potential” for British companies, Forgione said.
He said that the recent agreement concluded between the UK and the Gulf Cooperation Council (GCC) confirmed the significant potential and willingness to facilitate trade between the two parties.
Boldison mentioned the government estimate that around £360m of duties will be removed on day one of the agreement, with over 90% of current UK exports to the GCC becoming tariff-free over time.
GCC countries – which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – continue to implement initiatives to attract foreign businesses, investing heavily in sectors where the UK is strong, such as healthcare, life sciences, food innovation, sustainability and technology.
A poll during the webinar reflected the enthusiasm around the FTA, with 40% of the delegates saying they were looking to increase trade in the region.
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