Regulatory changes, food fraud, and the ongoing effects of COVID-19 are the primary causes of supply chain disruptions, according to new BSI report

April 29, 2021

Herndon, VA - Today, BSI, the business improvement and standards company, unveiled its annual Supply Chain Risk Insights 2021 Report that identifies the trends and associated risks likely to impact global supply chains in the year ahead. The report is powered by the global data in BSI’s proprietary web-based, comprehensive intelligence system. Using this insight, BSI predicts the following trends will likely dominate the global supply chain throughout the year ahead:

  • Ongoing challenges from COVID-19 creates new threats for organizations in the coming months
  • Economic hardship increases the risk of labor exploitation, human rights violations, and stowaway smuggling
  • Drug smuggling trends remain consistent, however, means and methods will continue to change and evolve due to COVID-19
  • Food fraud and safety will continue to challenge supply chain resilience
  • Regulatory changes will test organizational adaptability

The Supply Chain Risk Insights 2021 Report sheds light on these new threats and the progress made in addressing ongoing challenges while offering guidance on best practices that can be used to counter and manage risk.

“COVID-19 will certainly have latent effects on organizational resilience throughout 2021, directly and indirectly shifting the way organizations do business,” said Jim Yarbrough, Global Intelligence Program Manager at BSI. “However, several other challenges, including increased regulation of supply chains and forced labor, are poised to challenge organizational resilience and business continuity as the world continues to grapple with the lingering impacts of the pandemic.”

Ongoing challenges from COVID-19 create new threats for organizations in the coming months

Many of the COVID-19 related challenges that organizations faced in 2020 forced them to adjust in novel ways to maintain their supply chain continuity, integrity, and overall resilience. Yet, at the same time, the spread of the virus seemed to merely exacerbate historical trends and known risks such as cargo crime, man-made disruptions, and political protests, which all remain as risks to supply chain resilience in 2021.

BSI intelligence noted an increase in thefts from facilities in Africa and Europe and an overall increase in stolen medical supplies last year. However, despite these changes noted in the BSI incident data, some trends remained the same, such as in Latin America, which continued to experience a high number of hijackings, and the United States and Canada saw consistent trends in the targeting of trucks parked in vulnerable locations.

As the spread and impact of COVID-19 reduce, cargo theft trends are expected to return to pre-pandemic levels, with certain types of goods losing value again, such as personal protective equipment (PPE), and the resumption in trade leading to more movement of vehicles, restoring thieves’ opportunities to again strike this transportation mode.

Economic hardship increases the risk of labor exploitation, human rights violations, and stowaway smuggling

As COVID-19 pushed countries into lockdown, it also put the world’s most vulnerable communities at greater risk of labor exploitation and human rights violations, creating new migration trends as individuals attempted to avoid hardships and seek new economic opportunities. School closures combined with ongoing reduced family incomes suggest a greater potential for child labor in the year ahead as all family members are forced to work as they try to make a living.

In addition, border closures and other pandemic impacts occurring at the start of 2020 led to a decrease in migration; however, new stowaway smuggling routes and labor risks developed later in the year as controls declined, but economic opportunity continued to be sparse, leaving migrants outside their countries susceptible to labor exploitation. While mass migration on its own does not pose an overt threat to supply chains, it is the tendency for some individuals, often facilitated by organized crime, to exploit gaps in security that are the real risk to individuals and organizations and will likely be at the forefront of supply chain risks in the year ahead.

Drug smuggling trends remain consistent, however, means and methods will continue to change and evolve due to COVID-19

As with cargo theft, the spread of COVID-19 had a major impact on drug smuggling in 2020, leading groups to adapt in tactical ways that led to altered risks to supply chains. The spread and response to COVID-19 cut off traditional supply chains through lockdowns and mobility bans, challenging operators, port security, and other introduction points. Despite these changes, smugglers adapted to the COVID-19 world by changing their means and methods while largely following historic patterns. Gangs in the traditional production centers for illegal drugs in Latin America and Asia continued to produce and attempted to transport to the same destinations; however, smugglers employed novel methods of concealment or used new routes to move shipments of illegal drugs to destination markets in North America and Europe. The new means and methods of drug smuggling will present additional risks and challenges within supply chain operations in the year ahead.

Food fraud and safety will continue to challenge supply chain resilience

The COVID-19 pandemic initially led to panic buying, stockpiling, and overall disruption to food supply chains in well-developed countries; while these countries were able to manage the problem, it did expose flaws in global food supply chains that criminals could use to introduce fraudulent food into legitimate supplies. These same vulnerabilities existed in food supply chains prior to 2020 and continue to exist now, indicating that food organizations will continue to be susceptible to fraud in 2021 and beyond. Part of the challenge lies in the globalization of food supply chains, which sources inputs from an array of countries that may or may not have a robust framework and enforcement apparatus available to combat fraudulent practices. According to a 2020 report from the Food and Agriculture Organization of the United Nations, “trade in food and agriculture has more than doubled in real terms since 1995. Emerging and developing countries have become active participants in global markets, and they now account for about one-third of global trade.”[1]

Given the significant level of global food shortages, BSI found that the risk of food fraud is on the rise. Specifically, alcohol and tobacco products saw a global increase in thefts and counterfeiting, given their increasing value and related shortages, as consumption rose while people were in lockdown.

Finally, issues of food safety continue to be of paramount concern, as the spread of COVID-19 last year significantly affected government capacity to enforce food safety regulations, which means that some foods may not have been checked as thoroughly.

Regulatory changes test organizational adaptability

In 2020, governments passed a range of regulatory and legislative measures that will continue to affect supply chains and are likely to challenge organizational resilience by creating new compliance measures aimed at increasing sustainable sourcing and improving supply chain security. It is almost certain that organizations will have to increasingly scrutinize the supply chain for susceptibility to labor violations, as a number of governments made a concerted effort to address this issue. As such, these new regulations pertaining to security could have impacts on business operations in 2021, underscoring the need for continuity planning. Finally, in addition to regulation aimed at eliminating the use of forced labor in the supply chain, regulatory developments surrounding sustainable sourcing and deforestation, as well as cargo and port security, will impact organizations throughout the year ahead.

To download a copy of BSI’s Supply Chain Risk Insights Report, please click here.

ENDS

[1] http://www.fao.org/3/cb0665en/CB0665EN.pdf

Note to Editors:

The data and analysis within this report is taken from BSI’s global supply chain intelligence platform which provides insight into supply chain security, business continuity, food safety and fraud, and corporate social responsibility threats and trends in real-time. This web-based tool allows users to visualize risk on a global scale and easily identify high-risk locations and potential exposures. Our news and country risk reports combined with proprietary global risk maps help organizations stay up to date with emerging threats and better protect their supply chain, brand, and reputation. For more information about our data and intelligence platform, please contact us directly supplychain@bsigroup.com.

About BSI Supply Chain Services and Solutions

BSI Supply Chain Services and Solutions is the leading global provider of supply chain intelligence, auditing services, audit compliance, and risk management software solutions and advisory services. Our mission is to help corporations, governments, and associations identify, manage and mitigate global supply chain risks and maintain world-class governance risk and compliance programs. Our holistic supply chain risk management suite is designed to predict and visualize risk and develop robust risk mitigation and compliance management programs to protect your supply chain, brand, and reputation. Our intelligence-infused supply chain solutions and global network empower our clients to understand global supply chain risk with unequaled precision.

To learn more, please visit www.bsigroup.com/supplychain.