Companies and countries worldwide are realizing the risk of not diversifying supply chains, Citi CEO Jane Fraser said at a recent summit.
In the past few decades, there has been a strong emphasis on the efficiency of sourcing and moving goods with a limited focus on concentration risk. However, in recent times, the focus has shifted to supply chain diversification in light of changes to the geopolitical and macroeconomic environment. According to Citi CEO Jane Fraser, this is long overdue.
«We see nearly every country and company focused on security — be it food, water, energy, cyber, financial or operational security. And consequently, they’re reconfiguring supply chains to meet the demands of customers and other stakeholders,» said Fraser during the APEC CEO Summit in San Francisco yesterday.
Some Losers
«It took too long but we’ve all woken up to the fact that concentrating the sourcing or production of any good — let alone essential goods — in one part of the world can have dire consequences.»
While there will undoubtedly be some losers, there will also be new winners and Fraser noted three key benefits in this regard.
New Trade Corridors
Firstly, smaller players will be able to engage in global trade. Secondly, diversified supply chains are also creating diversified economies and this can be observed in countries like Malaysia, Thailand, Vietnam, Saudi Arabia and the UAE.
Thirdly, new trade corridors are being formed. Brazil is trading more with India and China than Argentina while the Middle East is now linked more to Asia than Europe.
New Era of Diversification
«Today, amidst the backdrop of transformative technological innovations, increasing resilience is the clear and resounding call,» Fraser commented. «This heightened focus on resiliency has given birth to a new era of diversification, and as businesses and countries adapt to this era, we’re starting to see clear benefits in economic growth.»
Nonetheless, Fraser noted that excessive self-reliance won’t actually improve security and that resilience should instead be built via intra and inter-regional collaboration.
Old System Disrupted
«As the old system continues to be disrupted, the new era of diversification will evolve to meet new demands,» she added. «We are far from the end of globalization, but it is changing. And with those changes, we’re seeing tremendous opportunities for all our economies to work together to tackle the unique 21st century challenges.»
