Global supply chains continue to face a range of security, social responsibility, and business continuity risks

  • 23 May 2017

In 2016 global supply chains continued to face a range of security, social responsibility, and business continuity risks, with many of these issues provoked by one another, according to BSI's Global Supply Chain Intelligence Report.

The report noted multiple incidents that started out as a security, social responsibility, or a business continuity risk that cascaded into other supply chain issues. The European migrant crisis is perhaps the best example of a type of event that began as a single security risk, before building into a business continuity disruption as countries imposed border controls, which in turn was exacerbated by blocked migrants looking for work, often falling victim to forced labour in certain nations. As risks, such as the migrant crisis, continue to evolve, it's imperative that organizations work together to take a holistic risk management approach to ensure they are informed and prepared to address multiple areas of concern.

In 2016, governments in Asia responded to increasing levels of supply chain risks, but many policies were merely reactive and often led to further threats to the integrity or continuity of the supply chain. BSI observed a shift in labour strike threats in China in 2016, driven mainly by concerted government efforts to limit strikes in the country following years of increasing labour disruption. Labour strikes still occurred in large numbers across China last year, but the number of strikes dropped in 2016 for the first time in recent years. Strikes at factories dropped by 31%; with two-thirds of provinces – including major apparel, consumer goods, and electronics production hubs – witnessing a decline in manufacturing strikes. An emerging area of concern is the growth in strikes in the logistics sector, including trucking, shipment processing, and delivery, which rose more than fourfold from nine incidents in 2014 to 40 last year.

Asia also saw an increase in labour rights concerns in Bangladesh in both the ready-made garments sector and in other industries. A December 2016 survey of the Dhaka slums found a far higher incidence of child labour than previous government studies had suggested, with 15% of children employed in formal and informal enterprises. Additionally, the survey found that a significantly larger proportion of children were employed in the formal RMG sector than had been previously believed. The study also documented abusive practices in garment factories that employed children. Over 37% of girls reported being forced to work overtime, while children employed in the formal garment sector earned only half the national minimum monthly wage for garment workers.

Europe experienced significant terrorist attacks in Nice, France in July and Berlin, Germany in December, along with dozens of counter-terrorism arrests across Europe in 2016. Those attacks in particular also underscored the threat that terrorists will exploit the supply chain to perpetrate attacks. In both cases, Tunisian men linked to the Islamic State in Iraq and Syria (ISIS) used cargo trucks to ram into crowds of civilians. The Berlin attacker even perpetrated an explicit disruption of the supply chain before the attack by hijacking a Polish tractor-trailer carrying a shipment of steel beams. ISIS-linked plots involving similar timing and tactics are likely to continue challenging European security into 2017.

In Turkey, a faction within the military launched a failed coup against the reigning Justice and Development Party (AKP) government, leading to significant security and business continuity impacts in the short and long terms. The Turkish government's response to the coup attempt has exacerbated security and business continuity threats in the country. Days after the coup, the government began widespread purges of numerous government departments and agencies across virtually every ministry, as well as the military, police, and intelligence services. There have been 100,000+ officials removed from public duty, 70,000 investigated and 32,000 arrested in total.

Supply chains in the Americas faced a wide range of risks related to security, corporate social responsibility, and business continuity in 2016. Cargo theft remains a main concern for the Americas with the most dramatic increase in cargo theft rates in Rio de Janeiro last year. Already the second largest hotspot for cargo theft in the country, officials in Rio de Janeiro reported a total of 9,870 cargo theft incidents in 2016, 36% more incidents than those recorded in the state in 2015. The year-over-year increase in cargo theft incidents in both Rio de Janeiro and Sao Paulo, combined with minimal efforts to curb the rate of theft, suggests that Brazil could see another year of increased cargo theft in 2017.

BSI also recorded varying degrees of improvement in corporate social responsibility protections in Latin America in 2016. The BSI SCREEN Intelligence Team reduced the rating for the threat of child labour in both Ecuador and Panama due to each country's sustained efforts to drastically eliminate the problem. In Ecuador, the government reduced the rate of children working in the country from the 16% recorded in 2007 to now less than 3%, with Panama succeeding in reducing the rate of child labour in the country to about 4%, a number that represents a 50% reduction since 2012. Although most countries in Latin America improved upon their corporate social responsibility record, some nations, particularly Peru, failed to make much headway last year.

In 2017, BSI expects continued threats of cargo theft and drug smuggling in the Americas and Europe, protests over wage and other labour issues across Asia, and persistent risks of terrorism, including terrorist targeting of the supply chain. New initiatives to address security, social responsibility, and continuity risks in many regions will require close monitoring to assess their effectiveness at the ground-level.

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