What Procurement Leaders Are Doing To Manage Geopolitical Risk

The conflict in the Middle East is escalating rapidly and uncertainties loom over trade policies ahead of the U.S. presidential elections.

No wonder that geopolitical factors are among the biggest concerns for procurement and supply chain leaders, as is evident in two different surveys.

Impact on Spend Categories

In a recent survey by the Chartered Institute of Procurement & Supply (CIPS), a global body of procurement and supply chain professionals, executives were asked about the likelihood of supply chain shortages, spend categories that might see disruptions and/or shortages and their impact on input prices.

Respondents listed the following spend categories as susceptible to shortages and price increases: food products and beverages, paper and paper products, coke and petroleum products, chemicals and chemical products, computers and peripheral equipment, electrical machinery and apparatus, and shipping and logistics.

Around 52% of the procurement and supply chain leaders chose geopolitical risk and political uncertainty when asked what could cause potential shortages in the next 12 months.

Most Leaders Are Expecting Disruptions

In another survey, by Economist Impact, 63% of executives flagged macroeconomic uncertainty and geopolitics as major supply chain disruptors . Compare this to 2022, when only 29% expressed concern over these issues.

Also,?55% of the respondents anticipate significant supply-chain disruptions.

So, What Are They Doing About It?

Procurement and supply chain leaders who spoke to CIPS listed the following three strategies:

• 69% are diversifying the supplier base
• 59% are extending contracts
• 42% are going for insourcing

As for the participants of the Economist Impact survey, their goal is to build resilience rather than merely manage crisis when disruptions occur. This entails stress-testing supply chains, deeper supplier collaboration and faster technology adoption. In fact, boosting resilience and security are the primary reasons 63% of executives are incorporating generative AI into supply chains.

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