Monitoring risks necessary when expanding into emerging markets

Supply chain risk was the theme for the morning session of the second and final day of Ti’s Emerging Markets Conference, sponsored by Agility.

Ken Lyon, Managing Director for Virtual Partners and Advisory Board Member for Transport Intelligence led discussions on cyber threats and catastrophic risks. Unsurprisingly, attacks on information systems are on the rise. Among the issues affecting this rise include the fact that most systems are compromised by social engineering – when people share at a social level issues or other information on their systems -it may alert hackers who in turn use that information to hijack that system. The best way to reduce such attacks is education. According to Mr. Lyon, educating users is more effective than blocking websites.  But perhaps one of the key things companies should do is to at least implement basic methods of risk management such as audits of information which should ensure a safe operating system.

The next discussion dealt with catastrophic risks which can include such things as natural disasters and piracy. According to panelist, Chris Price, CEO Asia Pacific at Agility, while longer events can take up to six months to recover from, the frequency of smaller events can be more detrimental. Jaya Moorthi, APJ Logistics Director of Hewlett-Packard Asia Pacific, noted that 49% of catastrophic events occur in Asia and the dynamics of next day delivery and online ordering are adding a new range of risks in the region. To reduce such risks, Mr. Price suggested contingency planning should be carried out. Ken Lyon noted that a good operating system is also needed. Also, monitoring the supply chain will allow the company to see where risks may pop-up and what back-up is needed.

To conclude the morning theme of supply chain risk, John Manners-Bell, CEO of Ti, presented an interesting presentation on security and corruption followed by a panel discussion on the topic.

Defined by the World Economic Forum, corruption is “the widespread and deep rooted abuse of entrusted power for private gain. Emerging markets offer enormous opportunities, but also can also expose logistics companies to countries with poor security, weak governance, inadequate judicial and legislative systems, high levels of bureaucracy, high levels of trade barriers and endemic corruption among government officials.”

One of the reasons why the logistics industry is so vulnerable to corruption is its close engagement with customs officials. In the developing world, government employees are often poorly paid. For example, Ralph Lauren was fined $882,000 for bribing customs in Argentina between 2004 and 2009.

Cross border activity in parts of West Africa is characterised by the endemic payment of bribes and harassment. One of the problems concerning trade with Nigeria is the length of its restricted goods list, which prohibits or limits the importation of goods from neighboring countries.

In India, drivers have to pay about Rs250 per day in bribes. A survey of truck drivers found that 95% reported paying bribes. This high level of bribery is because of the large amounts of documentation that are needed when crossing state borders. In fact, bribes make up a fifth of road freight operators’ costs in India.

The last day of the Emerging Markets conference concluded with discussions on Asia-Pacific infrastructure and lastly Asia-Pacific e-commerce.