Simon Freeston, Senior Business Resilience Consultant at Databarracks, explores how geopolitical shocks like the war in Ukraine and tensions in the South China Sea can disrupt critical supply chains and operations – and what businesses must do to prepare.
As we move into a more globalised world, organisations’ supply chains are increasingly exposed to disruption from events happening elsewhere. Recent history offers a clear example: COVID-19 severely disrupted global supply chains, especially around the delivery of technology or any product produced in the People’s Republic of China (PRC). This pandemic brought into the public eye just how impactful a global event like COVID can be. But that was a natural phenomenon. What about a man-made crisis?
The subject of international affairs examines how countries use war, diplomacy, trade and foreign policy to further their grand strategies in the international arena. But why should your organisation pay attention? Because these decisions can reshape the risks you face overnight.
The changing nature of conflict
At its core, every nation’s grand strategy aims at one thing: survival against existential threats. Historically this would result in armies marching across fields with banners flying to defeat an enemy, but in modern times, with the advent of nuclear weapons, these conflicts are less common (though not non-existent). Countries now have several political and non-military weapons they can use to further their strategies in the international arena, whether to maintain hegemony, challenge a unipolar system, or restore perceived lost territory.
As recent history has shown – and as both Clausewitz and Sun Tzu warned – you can never be certain of your opponent’s next move. From a Western perspective, the Russian invasion of Ukraine made little sense. But to the Russian political elite, it was vital to achieving their goal of survival: survival of their country from perceived threats of NATO expansion, and survival of their grasp on power.
The Ukraine wake-up call
This war sent shockwaves across Europe, with sanctions being used to attack the Russian economy to bring the war to an end. Western organisations began withdrawing from Russia at once. But how many of those organisations had been monitoring the increased tensions in the region since 2014? And how many were aware of Putin’s long-running narrative describing Ukraine as a “fake country”?
Few anticipated how fast pressure would mount for organisations to take a stance, driven by PR and social media. When President Zelensky began calling out companies still operating in Russia, the reputational risk became as serious as the operational one.
Are we prepared for the next crisis?
As business continuity practitioners, we need to be aware of what’s happening in the geopolitical landscape and the risks it could create for our organisations. In my view, we often fall into “Western thinking” without realising it, and that can leave us exposed. What other major geopolitical risks are out there, and are we planning for them?
The biggest would be a crisis in the South China Sea between the PRC and Taiwan. From a Western point of view, we might look at the sanctions placed against Russia and the coordinated Western approach to supporting Ukraine through this war and think no one would try that again – especially the PRC, which relies heavily on global trade to support its economy. Unlike Ukraine’s vague 1994 security assurances, Taiwan has more explicit defence commitments from the United States and regional allies like Japan. Yet Ukraine’s experience should give us pause – security guarantees are only as strong as the political will to enforce them.
But this analysis falls into the same trap: we’re applying Western cost-benefit logic to a regime operating under entirely different imperatives. It’s vital to understand what else is happening that could drive the PRC down a route which results in the invasion of Taiwan. Domestic pressures – economic slowdown, political imperatives, historical grievances – don’t operate by Western logic.
The questions you need to ask
Here’s what you need to consider: what would be the impact on your organisation if the same level of sanctions levelled against Russia were applied to China? How reliant is your business on products manufactured in China? How dependent are you on high-tech equipment that uses semiconductors produced in Taiwan?
A conflict in the South China Sea could have huge consequences around the world. As business continuity and crisis management professionals, we need to be aware of these risks, monitor their likelihood and understand what could happen in the event of conflict and how businesses may be affected.