Coronavirus is disrupting global value chains. Here's how companies can respond
Coronavirus is disrupting global value chains, which are essential for economic growth.
This outbreak shows the need for companies to focus on preparedness and response to risk.
Businesses should increase the visibility of value chains, shorten supply chains to be nearer to customers, leverage technologies and evaluate different scenarios.
It is clear that the COVID-19 (coronavirus) outbreak is disrupting manufacturing and global value chains, with consequences for businesses, consumers and the global economy. Many CEOs are scrambling to respond to urgent questions about how to protect their employees, ensure supply security, mitigate the financial impact, address reputational risks, and navigate market uncertainty, which is driving down demand.
Global value chains, which are essential engines of economic development and GDP growth, have traditionally been designed to optimize for cost competitiveness. The coronavirus underlines the need for companies to focus on risk competitiveness as well.
A new kind of disruption
COVID-19 is already having significant effects on global markets. Fear of the virus is affecting the global oil price, as Chinese refiners slash output in anticipation of shrinking demand at home. Slowing Chinese demand is further darkening the outlook for suppliers. According to conservative estimates from Reuters, China’s economic growth is expected to slow to 4.5 percent in the first quarter of 2020—the slowest pace since the 2008 financial crisis and could cost the global economy $1.1 trillion in lost income.
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