In the business world, few of us were ready for the irrevocable shift that COVID-19 brought – and even fewer were expecting the cascading effects created by the Russia-Ukraine war. But in the world of risk and resilience, the mark of leadership is the ability to adapt to the unexpected and trust in a well-honed culture of preparedness, even when the crystal ball is slightly hazy.
2022’s Expanding Supply Chain and Energy Challenges
Over the past three years, the efforts to counter COVID-19 have severely disrupted the free flow of goods. In the Global Risk and Resilience Trends Report and the Predictions Report, DRI International surveyed nearly 500 resilience professionals across all industries and sectors. Two themes emerged when asked about the major issues of 2022. One was expected – the ongoing supply chain crisis. This issue has been exacerbated by the second theme – the effects of the Russia-Ukraine war including increased geopolitical risks but also the energy and food insecurity that much of the world now faces as a result.
Although supply chain disruption wasn’t the highest ranked resilience concern, in many ways it is the most interconnected. While the sector most acutely impacted by these challenges was manufacturing – with other industry organizations like the National Association of Manufacturers offering warnings with each quarter – healthcare, education and technology all also ranked it as an important concern. There were no significant differences among regions – confirming that it is a fully global problem.
Among the issues identified were the disruption of key supplies, supplier failures, low inventories, the use of single or sole source suppliers, the global shortage of commodities and raw material, the transportation problems at docks and depots and of course, labor shortages. Complexity only continues to grow across the global economy and the resources to compensate for it are diminishing, resulting in a world in which organizations must do much more with much less.
How will the War in Ukraine Shape 2023?
The human toll of the war in Ukraine is a tragedy unfolding everyday before our eyes. The effects will be felt far beyond the battlefield. The war has generated other shortages in some basic foods, fertilizers, chemicals, metals, and other minerals as well as oil and gas from Russia. What started as primarily a European issue is already impacting the entire world.
According to the Federal Reserve, the war is expected to further impact not only the supply chain, but the entire global economy, as inflation and high interest rates fuel a possible recession, according to the annual Prediction Report’s second item. Europe is a problem region, because of its high dependency on imported gas and oil – particularly from Russia, and food inflation remains a problem in Europe (particularly in the United Kingdom).
This leads us to another prediction regarding an intensified drive to find alternative energy sources. Outlets including Al Jazeera report that the Ukraine war has also increased the need to find alternative, renewable, and diversified energy sources. Traditional sources of oil and gas, such as the Middle East and Russia, are too volatile to rely on for guaranteed supply, so countries will develop their own industries or partner only with reliable allies.
Predictions Becoming Expectations
As events in Europe will take time to further unfold and shape our understanding of the year to come, one prediction has already come true. No sooner had the prediction of “a major city in the developed world will experience unprecedented flooding from a storm-related event” been made, than heavy storms in California have inundated multiple areas, including parts of Los Angeles, with catastrophic floods, landslides, and power outages. While it’s the first major flood event of 2023, I fully expect that it won’t be the last.
With these events increasing in frequency and severity, one thing that is important is to stop associating flooding with “living on a flood plain.” As heavy rainfall events become more and more common, flash flooding can happen with very little notice in practically any area, particularly in those where the built environment was not designed with resilience in mind. Businesses, communities, and families need to be educated and prepared before the onset of a crisis when panic sets in and they’re forced to make decisions hastily in the middle of a disaster.
These extreme weather events are disastrous on their own, but nothing exists in a vacuum, and what may seem like a regional concern can have national and even global impacts in – yes, you guessed it – the supply chain. Columbia University’s Water Center has been examining difficulties unloading goods and food supplies from docks to blockages on major roads and railways, and how the effects of a flood on one coast can create further problems stretching out across the country, and beyond.
As we enter 2023, our goal is to prepare for the coming year and making sense of the past year’s sometimes surprising experiences. In the meantime, while my hope for you is that this new year goes completely as planned, it’s probably wiser to suggest that you expect the unexpected.