Mitigating Risk and Creating Action Plans during the Coronavirus Crisis

The outbreak of coronavirus originating in China is now having a global impact. Although the main focus of the disease is still in China, numerous cases have now occurred in many countries around the world. Not only is the virus a human tragedy, it also has a massive impact to our customers´ global supply chains. Enteprises run the risk of substantial financial loss with impact due to massive top- and bottom line effects.

riskmethods recommended actions

  1. Identify affected supply chains (suppliers, hubs, warehouses, factories,…)
  2. Assess the potential impact to navigate your rare resources on the most impactful areas
  3. Start to mitigate
  4. Post-crisis: plan for long-term business continuity, evaluate insurance options
  5. Consider health as a key aspect to inform all potentially affected stakeholders (see WHO recommendations for health prevention)

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Macro Level Impact of Coronavirus

  • Supply shortages of materials or finished goods coming from or routed through logistical hubs in impacted areas.
  • White- and blue-collar labor may not be available due to quarantine guidelines or illness.
  • Travel may be restricted to certain areas, limiting the ability to discover, qualify and certify new business or programs and to transact business.
  • Established hubs and supply networks may experience limitations in capacity and availability so that even if materials are available, they would be stuck elsewhere. Finding alternative routes and means of transportation will become difficult.
  • Consumers may be more cautious in their purchasing habits due to fears about being in public and potential exposure to the virus. Many may turn to online sales, challenging logistics networks.

Relevance of China for Procurement

based on 2020 survey conducted by Kloepfel Consulting

  • 81% of global companies rely on chinese suppliers
  • Every 3rd company has major chinese customers
  • 41% of companies delay projects and face increased cost
  • Every fifth company is afraid of production stoppage

Free Webinar: Prevention, crisis response and mitigation in case of the Coronavirus

Facts about Coronavirus and China

  • All provinces in China report infections
  • All Industrial centers affected
  • China central bank pumped 165BN EUR into Chinese market
  • Labor shortages expected due to quarantine and travel restrictions / bans
  • S&P Global expects rate of growth in China to fall by 14% to 5 percent in 2020
  • IHS Markit’s projects that Corona outbreak results in a reduction of global real GDP of 0.8% in Q1 and 0.5% in Q2
  • According to Spend Matters: half of Fortune 500 companies affected
  • China export goods (Overview)

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