- Global supply chain risk climbed to 80.8 in Q2, a level not seen since 2013
- CIPS Q2 Risk Index reports increased supply chain risk across MENA from Q1
Supply chain risk across the Middle East and North Africa climbed to 4.406 from 4.371 during the second quarter of 2016, according to the CIPS Risk Index, powered by Dun & Bradstreet.
Global supply chain risk climbed to 80.8 in the second quarter of 2016, which is amongst the highest levels since records began in 1995. This continued the worsening trend in global supply chain risk which has been following this trajectory since the fourth quarter of last year. The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains.
The CIPS Q2 Risk Index indicates that due to ongoing political and economic challenges in the region, the MENA supply chain risk gauge has reached its highest levels since Q1 2015. The UAE’s commitment to lodge $1 billion deposits in Egypt’s central bank system could help to ease the chronic shortage of Foreign Exchange (FX), but it is too early to assume how this may contribute to the situation improving.
Sam Achampong, Regional Director, CIPS MENA said: “As oil prices remain relatively low, the UAE is taking active steps towards fast-approaching 2020 visions, and is bolstering its economic landscape to accommodate for any additional business activity that may be redirected from the UK as a result of its recent vote to leave the EU”.
“In addition to this, while the recent current account deficit in Egypt’s central bank has contributed to higher risk in MENA, the UAE agreement to support Egypt may have a positive effect on the regional supply chain landscape in time.”
One main contributor to the higher Risk Index was the increased interest rates in Egypt reaching a base rate of 12.25%, following a rise in inflation in May 2016. The 13% devaluation in the Egyptian Pound in March has failed to resolve the problem of chronic shortages of FX in the banking system, which has impacted the ability of importers to purchase goods, thereby disrupting supply chains in Egypt.
On a global level, the UK’s vote to leave the European Union has had an impact on global supply chain risk. Immediately after the Brexit vote, a dramatic fall in Sterling led to soaring costs for businesses that relied on importing, prompting many to reconsider their sourcing strategies.