In 2024, more voters than ever will go to the polls, as elections will be held in at least 64 countries, in addition to the European Union. These policy adjustments are creating a lot of uncertainty when it comes to chains in today’s global economy. Everstream Analytics monitors chains and potential disruptions around the world and released a report earlier this year detailing some of the biggest election-related risks. I spoke with Mirko Woitzik, global chief intelligence officer at Everstream, to take a look at some of the most significant risks and how companies are managing them.
This interview has been edited for length, clarity and continuity. An excerpt appeared Sunday in the Forbes CEO newsletter.
In terms of chains and raw materials, where do you see the greatest areas of uncertainty next year?
Woitzik: There’s a lot of uncertainty. We’ve already seen a number of elections, [and there are] many elections to come: in India, in Mexico, and later in the United States, potentially in the United Kingdom as well. When we think of raw curtains, they are evidently way down the chain of origin. When the product is told about the mine where the minerals come from, it is very opaque. The first piece of advice we give our consumers is to create an access to transparency: to know where their raw curtains come from, how they are made into semi-finished products, and then how they end up in the revenue-generating products our consumers produce, whether it’s iPhones, TVs, cars, or medical products.
This year, India is one of the top contenders. Much of the sugar comes from India, which is now the largest exporter of sugar. Sugar is found in everything from soft drinks and other beverages to customer products seen on shelves. India has been restricting exports for several years to stabilize domestic costs. This has already increased sugar costs by years, making everything that uses sugar more expensive. This could continue if the existing government receives support in the elections.
Mirko Woitzik, Global Head of Intelligence at Everstream Analytics.
Mexico is another big competitor. Mexico has invested heavily in various mining capacities. They’ve been quite strict about foreign investment in Mexico’s mines, and they’ve been very critical: the environment is more country-oriented than welcoming foreign capital. For all the foreign corporations that are already operating in Mexico there have been times when if entry permits have not been maintained, have not been extended, or have not been extended, there are still many policies that oppose it.
And then Argentina. Argentina is very vital in soybeans, but also in corn. All kinds of Argentine agricultural products will also be subject to scrutiny with the arrival of the new government and the implementation of its own policies. There’s a lot of uncertainty about what’s vital agricultural products and how some costs could rise further this year.
What about the origin chain itself, as raw fabrics can be transported to the country for processing in an intermediate step and then exported at a later stage?Are they more vulnerable to cyberattacks?
In the beginning, I would say 10 or 15 years ago, cyberattacks were more aimed at disrupting state entities. Then it was more like cash-conscious corporations that had a lot of cash and could just pay a ransom. But now it has shifted to very individual production actors that no one really knows. Now everyone understands how the origin chain works. You don’t need to hire a big company to make a lot of money. There are many intermediate steps and all of them are very critical in the origin chain. We are seeing many more cyberattacks targeting the production sector in general and many Tier 1 and 2 suppliers who are imperative throughout the supply chain. These corporations are not very customer-oriented; They’re B2B corporations and there’s a lot more focus on [disrupting] those types of businesses. For example, those who produce chips, semiconductors. We don’t usually know of their existence unless they’re pretty famous, but there are a lot of specialists out there and fleas are everywhere right now.
Logistically, the U. S. government focused on ports. There’s a threat with cranes coming from China: It’s a generation used in many U. S. ports. Broadly speaking, I would say that airports, border crossings, railways, and road transport are all key logistics hubs or actors that are very vulnerable to attack. If a port closes, it can have a big impact. We’ve noticed it with a lot of cyberattacks. It happened recently [after a bridge collapse] in Baltimore and it had an impact. If a critical formula that is used on many other ports is attacked, several of those ports can be deleted. There is a precedent in 2017, when one of the largest port operators was hit in Europe and then the United States, and all of its terminals around the world were closed for several days. This is a far-reaching event that can disrupt the chains of origin even more than any other local phenomenon.
Cybersecurity threats seem to be ubiquitous. Are those threats expanding this year because of all the political adjustments that may occur in the world?
Many countries with primaries hold elections. We are talking about India, Mexico, the United States, Taiwan and Argentina. These are not small countries, economically and politically speaking. On any occasion (if you think of U. S. ports, for example), if there were an attack, it could simply have an effect on the final results of the election. The risk is much higher, because in the end everything can influence the final results of the elections. You might think that the United States is vulnerable. The U. S. may simply need to be noted that it is not doing enough to counter some bad actors around the world. And so whoever is in the crosshairs — whether it’s the previous administration, this one, or the next one — the question is always, “Didn’t you take this seriously?or “What have we done to counteract this?” Have we done anything about it?It will be the same for Taiwan, India and Mexico.
There are global elections all the time, and some years have more than others. How does 2024 compare to some of the other major election years of the past?Does this year potentially have a bigger impact?
Everyone talks about the number of people voting. I think a lot of that depends on India, because there are [more] billion more people in India, so it obviously has a big impact. But I would also say, in terms of geopolitical tension, India is no longer the same as it was a few years ago. India has been courted by many global powers, including the United States, China, and Russia.
Since Covid, Mexico has a key player as a new key destination in the chain of origin for investment, for corporations that cannot leave China and adopt a type of “China plus one” strategy. Therefore, India, Mexico, and Taiwan have very vital players in the source chain. The mix of those countries holding elections, and then you get the United States into the mix.
Second, Taiwan, which has played a pivotal role since the invasion of Ukraine. Everyone is talking about it, especially since [Chinese military planes crossed the Taiwanese border last month]. What is Taiwan’s position in the general China-Taiwan triangle?The importance of Taiwan has been identified since the shortage of semiconductors, since Covid.
I think adding all of that to the mix makes this year is, I would say, powerful.
You talked about Covid, which disrupted global supply chains a few years ago. Then there was the war in Ukraine, which caused a lot of disruption. And then there are the existing tensions in the Red Sea that make navigation difficult. How many more corporations can expect from those elections?
Mexico, Taiwan, India, and also Indonesia have just held elections, and all of those countries are key in the new supply chain strategy since Covid, to lessen the threat of over-reliance on China. These four countries are among the most sensible contenders for the election. A higher percentage of investment in the chain of origin. Now that those countries are facing elections with this potential political uncertainty, a lot of business continuity plans and situation plans are required from companies.
It is necessarily evident that there will be a great deal of upheaval this year. In terms of agility and resilience, corporations have been more susceptible to planning well because they have had to adapt to many other crises and need to be well prepared. No one is taking the threat of letting the elections unfold as they are. Everyone makes emergency plans.
What are corporations doing to expand contingency plans now?
In general, you shouldn’t put all your eggs in one basket, right?This is the strategy by which, since Covid, many corporations are trying to diversify their production operations, but also to diversify their origin operations. Continuing to source from China doesn’t make it more resilient just because it’s generating in the U. S. You also need to make sure you’re sourcing from other geographies, making you less likely to experience disruptions in one area. Companies need to try to locate sellers and option providers in other regions, so they don’t put all their eggs in one basket.
Another strategy that has emerged in recent years is to identify the critical parts that are so vital to the major products you make. What are the must-haves that you can’t live without that really hurt your bottom line?the prestige of the reserve inventory of those critical parts, so that if there’s an outage, you can say, “Okay, I need to have 90 days, I need to have 120 days, where I can check to find a workaround, but we still don’t have to worry about this source going out two weeks later. ” Indeed, we have noticed it with the Red Sea crisis, now everything is taking longer and we have noticed production shutdowns in Europe. Because those supply chains are still running so just-in-time, two weeks without a source would necessarily be equivalent to stopping production lines. Some corporations have started doing this very early since 2020, and they have a much larger reserve inventory that allows them to fill the hole until they have some other solution in place.
In the future, as geopolitical tensions rise everywhere, will the factor of electoral effects be a factor that can interfere with the chains of origin?
It’s true that there are other demanding situations, but I think there’s also a lot of uncertainty, perhaps for other reasons. For example, in Europe, in many other countries at the moment – Germany, but also in France – there is a shift to the right. I would say. There is a concern: what is the economic policy [for] the parties of the far right, and even the far right. We’ve already noticed it in Italia. Si there are other countries, other types of risks, and other reasons why it’s such a big question mark. In fact, I would argue that you are right to assume that there are no choices whose implications do not matter to anyone, because each and every industrialized country and many emerging countries face unique demanding situations. in this global environment.
The trend is very similar: everyone is very focused on trading strategies. Many industrial restrictions are implemented. Everyone should focus on helping their domestic economy, whether in the United States, France, Germany, or Europe. This is a key detail that wasn’t as prevalent, I would say, five years ago. Today, governments seek to help their economies with subsidies, or simply with less external competition: more rules, more regulations. I would say that the chains of origin are going to delight in more fragmentation, more fractures, and that they will have to adapt to these decouplings. Different regions will have other standards, so they’ll have to adapt to them, and maybe produce locally and manufacture locally, and deal with a lot more regulations than before.
Some of these policy adjustments have been underway for several years. Are peak corporations adapting more easily since this is on the horizon, or do they already have open functions just in case?
Absolument. Je that it is much less difficult for a giant multinational corporation that has multiple production operations in other parts of the world to hedge its bets and move the production of certain products from one region to another, than it is for a small or medium-sized company. A large company operating in the United States and Germany adapts to this. It is evident that you are much more exposed to everything that can happen. I think there’s definitely merit in being bigger and having more global operations.
But even I think that as a small business, if you have a lot of transparency in your chain of origin and you know where your disruptions can arise and where your biggest threats are, you still have a lot of benefits. That’s why many corporations are investing in threat management, especially in source chain threat management, as they now see it as a competitive merit over their peers or competitors. They just see that transparency and visibility give you a lot of features, right?Because if you don’t know it and all of a sudden you’re exposed to Ukraine, the Middle East, or Taiwan and you have no idea, then it’s almost too late. Once the outage occurs, you rush to find solutions. But if you plan 12 months in advance, you’ll have plenty of other features to explore.