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The New Normal: Being Prepared for Terror

Posted by ICECORP on Sep 14, 2017 9:45:00 AM

Terror attacks may not be the top of mind risk for your supply chain on a daily basis, but these disruptions happen far more often than you might imagine.

In fact, it is estimated that terrorists target supply chain operations at least once every seven days, and the number is rising. In a recent report, analyst firm BSI says terror attacks that affect supply chains have reached their highest level ever. [1]

Terrorism and the Supply Chain.png

And with that increase in attacks comes a corresponding climb in related costs.

With the prevalence of globalized supply chain networks, this burgeoning incidence of damaging attacks needs to be on your radar, requiring analysis of the risks and planning for recovery.

Frequent and widespread

Terror attacks on supply chain targets range the gamut from deliberate supply disruptions such as the destruction of transport infrastructure or natural resources extraction operations like oil wells or mines, to cargo theft, smuggling, cyber attacks, extortion and kidnapping.

In its report, BSI notes that in 2016 346 such attacks took place, and over the past 10 years there have been 3.1 attacks each week on average. BSI also reports that these attacks took place in 58 countries, with operations in certain areas, like India, Egypt, Colombia and Turkey being particularly frequent targets. In Egypt, the Suez canal—which moves approximately eight percent of the world's cargo—is under constant threat. [1]

Although the estimated global cost of cargo theft alone was US$23 billion in 2014, [2] the true financial impact of such disruptions can be difficult to calculate, given that there are usually both direct and indirect costs, as well as often untold ripple effects that cascade down the supply chain.

For example, in addition to the immediate costs of lost or destroyed cargo, an attack on a supply line will also incur the significant expense of rerouting cargo around the broken supply line, or even having to find a new source for goods or materials.

Sometimes disruptions are systemic, broad and enduring, such as the extortionate controls imposed on supply chain operations throughout Syria by ISIS during the civil war. ISIS was estimated to have imposed extra-legal tariffs on companies operating there to the tune of about US$3 million a day. [2]

Above and beyond the immediate costs of dealing with supply chain interruptions, organizations must also consider the indirect burden that extra security measures place on their operations. Compliance with regulatory regimes such as the C-TPAT (customs-trade partnership against terrorism) itself has direct financial implications, as well as the dampening effect of slowing down global commerce. [3]

Planning and response

Each one of these risks requires unique planning and response. Keeping your sources of supply and transportation routes open and flowing smoothly is key to ensuring successful operations. As a global operator you need to stay aware of threats, mitigate risks and be prepared with a recovery plan in the event of disaster.

Fortunately, there are plenty of resources and tested strategies you can turn to. Successful global supply chain managers employ careful planning to ensure they have back-up sources of supply and alternate routes planned, as well as a strategic emergency inventory in the event that backup supply lines fail.

Keeping a close eye on the political situation in the countries where you do business helps, and using the services of political risk analysis firms can keep you apprised of tensions and potential problems, but nothing beats being prepared with a strong security strategy.

"Corporations must take notice and prepare their organizations accordingly. We know that industry leaders are implementing stronger supply chain security measures and ensuring that their business partners and international suppliers are fully vetted and armed with the information and knowledge that will protect their business. They understand that these measures can go a long way in maintaining their global operations and business continuity," says Jim Yarbrough, BSI's Global Intelligence Program Manager.

Nothing new

"The impacts of the new era will challenge supply chain managers to adjust relations with suppliers and customers, contend with transportation difficulties and amend inventory management strategies," wrote Yossi Sheffi in a paper written in 2001, just after the 9/11 terror attacks in the United States. [4] Although Sheffi was writing in the immediate aftermath of 9/11 he had very quickly recognized the significance of that act of terror.

Little has changed since then for supply chain managers who operate globally, except that accepting the risk and preparing for it have become the new normal.

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  1. "Impact of supply chain attacks hits highest rate ever", BSI Supply Chain Services and Solutions, August 24, 2017. http://www.prnewswire.com/news-releases/impact-of-supply-chain-attacks-hits-highest-rate-ever-300508615.html
  1. "Losses due to supply chain disruptions increased in 2014", MM&D Online Staff, mmdonline.com, July 7, 2015. https://www.mmdonline.com/import-export-and-trade/losses-due-to-supply-chain-disruptions-increased-in-2014-140962/
  1. "The effects of terrorism on the supply chain", Mehtap Demirci, June 26, 2017. http://www.morethanshipping.com/effects-terrorism-supply-chain/
  2. "Supply Chain Management under the Threat of International Terrorism", Yossi Sheffi, The International Journal of Logistics Management, Volume 12, number 2, 2001. http://web.mit.edu/sheffi/www/documents/SupplyChainManagementUnderTheThreatOfInternationalTerrorism.pdf

Topics: Supply Chain


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