HSBC Report: Complex Global Supply Chains Remain Vulnerable

HSBC Americas Head of Global Trade Solutions Marissa Adams (Photo: Business Wire)
Supply chain finance is a vital tool in fighting uncertainty caused by geopolitical instability and complex supply chains, according to procurement leaders

Building Resilient Supply Chains Amid an Uncertain Geopolitical Landscape, a new report from HSBC in collaboration with Procurement Leaders — a World50 Group Community — highlighted the increasing complexity and geopolitical risks affecting global supply chains. It emphasised the importance of supply chain finance to mitigate these risks.

Supply chain disruptions are nothing new. The modern landscape with these products has become dependent on a range of different components sourced from across the globe, creating an environment where unexpected events can have a much more harmful impact.

Trade experts advise that companies take their ideas back to the drawing board when it comes to sourcing. Adding that organisations should focus on creating supply chains that are transparent, simpler and more resilient to geopolitical risks, sourced from markets closer to home, and not so dependent on a sole supplier.

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Supply chain finance is another important tool that companies can leverage to decouple their financial supply chain from their physical supply chain, according to Americas Head of Global Trade Solutions, Marissa Adams.

Marissa said supply chain finance allows organisations to hold more inventory on a cost-neutral, balance-sheet-friendly basis. Injecting liquidity into a trading relationship can add resilience and safety buffers.

“An intelligently designed supply chain finance programme can do a lot of heavy lifting in terms of de-risking trading relationships, improving supplier resilience, and providing suppliers with the finance to invest in and develop their businesses,” Marissa added.

Four-stage risk assessment

She suggested that companies follow a four-stage risk assessment and remediation process to plan for uncertainty: 

Take a risk-based approach to sourcing analysis: Rather than reviewing threats by tier, stock-keeping unit, or category, focus on those areas in which the organisation is most at risk, or where the biggest dangers lie. Often, these areas will be associated with specific regions or countries.

Analyse the consequences of supply disruption: Estimating the likelihood of disruption is difficult, but exploring the likely consequences of any disruption is not. Which products or product groups would be impacted? How quickly? For how long? Are any substitutes available? What might the financial consequences be?

Review the options available to help avoid disruption: What other suppliers exist? Where are they located? Do they offer the same product, i.e. like-for-like? How viable are they in terms of scale, technology maturity, time-to-market, and quality? Do you need to locate one, two, or even more alternative suppliers?

Repeat this process as necessary to avoid new and emerging risks: If recent history has taught us anything, it is that the world doesn’t stand still: geopolitical uncertainties arise over time. Your product offerings and supply base evolve. Repeat the exercise as new threats and vulnerabilities emerge.

This latest trade report follows the launch of HSBC Global Trade Solutions, a new identity for the bank’s long-standing Global Trade and Receivables Finance (GTRF) business.

Global Trade Solutions builds upon HSBC’s foundations as a trade bank, while creating new ways to connect the world through trade. The new direction focuses on supporting businesses for the future, helping them navigate the constantly evolving landscape of global trade by harnessing HSBC’s long-standing network, expertise and solutions.

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