Political Change Means Choppy Waters on Both Sides of the Pond for the Supply Chain

Businesses of all sizes and industries are finding it impossible to ignore what’s happening in global politics today. On both sides of the pond, election cycles in the U.S., UK, France, Germany and the Netherlands have demonstrated a trend towards nationalism and populism – seeds that have been partially sown in part by widespread economic uncertainty and what could soon be one of the largest immigration crises in recent history.

While the world’s eyes are trained on the election cycles in Europe, the economic impact has already commenced. In the UK, the British pound is currently rallying against the euro and U.S. dollar under the assumption that a snap general election on June 8 could result in more economic stability created through a stronger conservative majority in government. However, a stronger pound could have a negative impact on exporters who have enjoyed strong demand for goods as a result of a weaker currency. The UK auto manufacturing industry, for example, saw it’s best month since early 2000 in March on account of growing exports.

Of course, let’s not forget about Brexit. The good news is that it’s two years off and thus won’t be a rip-and-replace event. The bad news is that the precise implications as they relate to tariffs and currency are – and will continue to be – unclear for a while longer. Depending on which way the cards fall, some UK companies doing business on a global scale may need to move production facilities or identify new suppliers and supply chain partners.

Meanwhile, the state of business affairs in the U.S. is equally unpredictable. Teetering on the cusp of significant trade agreement renegotiations, American companies may also soon be pressured to contend with rising supply chain costs and rethink their supplier ecosystems.

It’s become clear that treasurers and finance teams will have to negotiate choppier waters with currency markets and trade policy as the global political landscape evens out. While the results of these changes may promote the domestic agenda, it could come at the expense of higher costs and greater uncertainty across the global supply chain.

At the intersection of supply chain and finance, risk mitigation has always been the order of the day. With so much going on in the world out of a company’s immediate control, this is one area where it is possible to exercise a good degree or control and order. How can we minimize volatility and protect margin? How can we minimize disruptions to cash flow and production? These questions will become increasingly critical throughout the remainder of 2017. While the specifics remain to be clear, change of historical proportions is afoot.