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Comment from Alistair Baxter, Head of Receivables Finance, Taulia

February 2022 by Alistair Baxter, Head of Receivables Finance, Taulia

Alistair Baxter, Head of Receivables Finance, Taulia comments: The news today of the incursion into Ukraine by Russian forces will concern business leaders who are already grappling with stressed supply chains. Every industry since the onset of the global pandemic has been strained, with freight operating at near capacity levels, shipping times lengthened, and inflationary pressure. However, the news today could usher in new issues – and not all of the disruptions will be as predictable as the price of oil going up.

The price of oil jumped to over $100 a barrel for the first time since 2014, and the US lead sanctions on Russian exports, primarily gas, as well as Germany’s cancellation of the Nord Stream 2 pipeline will have an impact on global economies; however, these factors have been well understood and largely factored into procurement contingency plans. The real challenge facing procurement leaders is the threat of the unknown: a digital attack. A digital coronavirus, that has the ability to paralyze trade flows.

In 2017 the NotPetya cyber-attack was reportedly designed to disrupt Ukrainian infrastructure, but it quickly spread cross border and resulted in a number of global corporates losing computer systems for days or weeks. This led to a number of port closures and over $1bln of economic losses across the logistics majors.

Just like in the pandemic, a shortening of supply chains, using local producers, increasing inventory levels may allow supply chains to continue functioning, but this will all come at a cost in terms of net working capital and working capital velocity. Treasurers will need to carefully provision for this period of uncertainty.




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