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Mitigating risk in international trade

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Trade war and procurement

As the US administration pushes ahead with its tariff agenda, businesses are being challenged to find new ways to try and mitigate the risks that arise as a result.

 

Procurement professionals need to keep their businesses moving forward, regardless of what’s happening in the rest of the world, but that isn’t always easy in situations that are in a state of flux.

 

The World Trade Organization (WTO) recently warned that further escalation towards an international trade war would result in significant downsides for the economic growth not just for the US and China, but other nations, too. Furthermore, that may have significant negative consequences for businesses.

 

In September 2018, the US administration proposed 25% tariffs on a further $200bn-worth of Chinese imports, in part, to try to reduce its trade deficit.

 

But there is more than just the dispute between the US and China that has international trade in flux: the UK continues to negotiate with the European Union over its withdrawal from the block, which has the potential to reshape the supply of goods across the continent.

 

More than ever, supply chain and procurement professionals need to develop a strategic plan to help better predict risk and provide alternatives to stay ahead of unanticipated changes in the sourcing and trading landscape. Last year, 41% of procurement chiefs said they considered developing such a plan to be optional, according to Procurement Leaders’ 2018 CPO planning guide. This illustrates businesses’ dire need to develop a more efficient and effective way to plan for the future.

 

Few organisations do consistent, comprehensive ‘what-if’ and any-market costing, which means those that do have a distinct advantage in these choppy waters. Building a comprehensive plan can help business leaders make better-informed and strategic business decisions, which will ultimately help procurement raise its own profile.

 

Decreased export orders are expected to slow the growth of global trade. Economists generally agree the free exchange of goods and increased international trade is beneficial for all countries and that current and proposed trade rules could prevent certain nations from participating. Because these trade wars are likely to continue for the foreseeable future, those functions and businesses that are armed with better strategies to forecast, predict and mitigate additional changes will be better able to handle the risk without alienating their customers.

 

Sue Welch is the founder and CEO of Bamboo Rose, a B2B digital marketplace

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

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