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Disrupt The Disruption: How Businesses Can Meet COVID-Forced Changes Head On

changes

Disrupt The Disruption: How Businesses Can Meet COVID-Forced Changes Head On

Businesses continue to navigate the changes that COVID-19 has wrought on the economy, rethinking how they serve customers, searching desperately for ways to cut spending, and trying to make long-term plans while ensuring short-term survival.

But it’s worth remembering that change that disrupts the economy is nothing new – with or without a pandemic, says Juan Riboldi (www.ascent-advisor.com), an international business advisor, author, and president of Ascent Advisor, a management consulting firm.

“The real issue businesses leaders must deal with is not change,” Riboldi says. “Instead the issue is what can we do so that we and our businesses can benefit from the change that COVID has brought.”

Anyone wondering where to begin should first look inward, he says.

“Since all change starts with individuals,” Riboldi says, “we must learn to recognize and correct negative tendencies in ourselves that keep us from successfully addressing change. A better understanding of these bad habits or tendencies will help us know how to effectively resolve them.”

To meet the changes caused by COVID-19 head-on, Riboldi says business leaders should:

Keep the trust level in your company high. When a manager goes back on decisions, hides uncomfortable news, or plays office politics for personal convenience, others in the organization will begin to distrust that manager. “If you make promises, be sure to keep them,” Riboldi says. “Otherwise you will lose the trust of others as well as their respect, both of which are desperately needed as you manage change.”

Stay focused. “Lack of focus is a main cause for why smart people do dumb things,” Riboldi says. “Being busy does not mean accomplishing more. When we work at a frantic pace, we often make more mistakes.” For businesses, this problem is magnified by the kind of economic uncertainty the country is going through right now, he says. “Companies experiencing  tough times often respond to unpredictable situations by panicking,” Riboldi says. “They try to do more with less, rather than simplifying and becoming more focused.”

Keep employee training on track. Businesses already worry that entry-level employees are deficient in many of the skills needed to do the job, Riboldi says. Many companies respond to economic downturns by cutting training and development budgets. “Doing away with training may provide temporary financial relief, but at a long-term cost on the capability of your workforce,” Riboldi says.

Inspire commitment in employees. The role of the immediate supervisor is essential for fostering commitment in workers, Riboldi says. When a supervisor fails to lead employees in a way that inspires teamwork and collaboration, commitment falters. “The most common problem affecting morale is when supervisors don’t provide employees with sincere recognition for their work,” he says. “Too often, supervisors fail to give heartfelt praise for a job well done. This simple action costs nothing and takes little time to do, and yet it is a crucial component in engaging a workforce.”

Understand the importance of short-term results. Riboldi says most major organizational change efforts fail to deliver the expected results. One of the main reasons for that is a lack of success early on. “Many promising change initiatives become prematurely aborted due to failure to show short-term gains,” he says. “Insufficient attention to short-term results kills even the best strategies and plans.” To be successful, Riboldi says, an organization must balance the short and the long term. “Achieving early wins builds support for pursuing longer term goals,” he says.

“Fortunately, the problems we encounter as we deal with change are both avoidable and curable,” Riboldi says. “We can identify their root causes and replace them with something better.”

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Juan Riboldi (www.ascent-advisor.com) is an international business advisor and principal and president of Ascent Advisor, a management consulting firm. He is the author of the upcoming book, Strategic Transformation: How to Deliver What Matters Most. For over 20 years, Riboldi has been advising leaders at the highest levels of business, education and government on strategy, organization, and execution. His clients include Fortune 50 corporations as well as fast-growing private enterprises. He successfully launched and led three consulting firms, and completed post-graduate studies at Harvard Business School and Wharton School of Business.

economy

Back to Growth: U.S. Business Leaders Have Rosy Outlook for Economy

The COVID-19 pandemic has affected every aspect of our work and life.

Business executives have had to quickly reconfigure operations, and millions have had to unexpectedly work from home or cease work entirely. Videoconferencing has become the killer app, and Zoombombing became a new privacy concern.

Despite the widespread health and business challenges brought on by the coronavirus, two-thirds of U.S. business leaders are optimistic the domestic economy will recover within a year, according to a survey TMF Group recently released.

It’s an encouraging sign that business executives in the U.S. are expressing this type of optimism, particularly based on the unprecedented challenges experienced throughout the economy over the last few months. This group was obviously very confident before the onset of the pandemic, and they now seem eager to not only restart their businesses but help reignite the economy as well.

We conducted the survey in the middle of April to gain insight into how companies plan to navigate these uncertain times. More than 40 percent of the 300 decision-makers who took part in the poll work in companies with more than 5,000 employees. Most of the respondents (85%) said their companies do business outside the United States.

Nearly a quarter of respondents (23%) expect a V-shaped economic recovery, meaning a dramatic bounce to pre-virus activity by the end of 2020 following the sharp collapse. Only a small minority (12%) anticipate the economic impact of the pandemic to the last two years or more.

Looking beyond the U.S., business executives were a little less optimistic but still positive: 56% of respondents said the global economy would recover within a year.

It may be easy for critics to judge the survey takers as stereotypical American optimists, but I believe their confidence is grounded on some key facts. The economic shock has been largely demand-driven, as travel restrictions and government stay-at-home orders shut down wide swaths of the U.S. and global economies. Many of the world’s governments acted quickly to offset the economic damage. In the U.S., the federal government and central bank organized a massive stimulus package and pumped trillions of dollars into financial markets. More than 60% of respondents said the financial support to workers and businesses in the U.S. has had a very positive or somewhat positive effect on their companies.

Now, as states allow more businesses to reopen, consumers are eagerly venturing out despite the ongoing health risks. As consumer and business demand rebound, companies will begin hiring again.

Indeed, business decision-makers are confident their businesses will rebound quickly. More than half say their companies will return to normal operations within six months.

In times of crisis, there’s a premium on bold leadership and decisive action. Resilient leaders continue to mount appropriate responses to the global pandemic while charting paths to recovery.

The survey underscored that the pandemic has forced business to rapidly evolve. Many are moving ahead to reassess, reimagine or reinvent their businesses. Thirty-six percent say they plan to accelerate plans for international expansion, and 32% plan to seize domestic growth opportunities.

It’s a positive sign that the strategic imperative to go global remains strong because COVID-19 has dealt a serious blow to the international system. The World Trade Organization predicted in April that world merchandise trade would plummet between 13% and 32% this year.

But the factors that have driven globalization for several centuries have not disappeared. People have been driven to seek profit internationally since the earliest days of the Silk Road, and this instinct will continue. Furthermore, the spirit of international cooperation has been strong in the response to the pandemic. Companies, government agencies and nongovernmental organizations are working across borders to solve problems at scale, such as developing a vaccine for the coronavirus.

A big motive for international expansion is the diversification of supply chains, cited by 35% of respondents. The coronavirus has interrupted the flow of goods across borders, from raw materials to finished products. The disruption has vividly illustrated that today’s highly interlinked, international supply chains have more potential points of failure and less margin for error for absorbing delays and disruptions.

Reducing dependence on one country or region is a priority. Diversifying your supplier base may increase costs in the short-term but will make your network more flexible and agile and potentially reduce the economic shock of future disruptions.

The outbreak of COVID-19 forced business to reassess every strategic objective and business plan. The health crisis has exposed vulnerabilities and created unforeseen challenges.

As businesses around the world consider how they can return from the economic crisis unleashed by COVID-19, the survey results provide some food for thought. Expanding internationally or domestically in uncertain times, for instance, may seem counterintuitive but could also fuel faster growth. Severe adversity provides real perspective. It is possible to find strength and confidence in the face of real hardship.

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TMG Group is an international professional services firm that provides administrative support services across multiple jurisdictions.

risk

Why COVID-19 is a Galvanizing Moment for Eliminating Physical and Digital Supply Chain Risk

When the COVID-19 pandemic began, the resulting economic fallout was felt across borders and industries alike. From manufacturing to financial services, every industry has been scrambling to minimize the impact of the pandemic on the bottom line. For many businesses, this has helped serve as an urgent wake-up call to take proactive steps to identify and eliminate risk across their global supply chains, which typically span several tiers of suppliers dispersed across the world. Real-time supply chain risk visibility plays a critical role in avoiding business disruptions.

The Economic Risk

There is an immense economic risk that needs to be considered when a business operates a global supply chain. At the start of the pandemic, we witnessed the inevitable ripple effects across not just multiple industries but also across multiple different tiers of suppliers. For example, 3.74% of sub-tier suppliers in the Department of Defense’s ecosystem closed as a result of the pandemic. 75% of small businesses have reported that they have only enough cash in hand for 2 months or less. As suppliers struggle or go out of business, significant supply chain disruptions are common.

This instability coupled with the multitude of other economic crises facing the world, such as ongoing trade friction with China, could precipitate a fundamental collapse of global business as we know it. We must monitor our supply chains for more points of exposure to risks than ever before.

The Data Security Risk

With computer hacking having increased 330% since the start of the pandemic, global businesses also need to account for the cybersecurity risks involved with having a supply chain across multiple countries and potentially hundreds or thousands of suppliers. The data systems of global suppliers are a potential entry point to a brand’s or government agency’s data systems, presenting a major challenge across the global supply chain. Organizations must be able to assess and continuously monitor the strength of supplier data security measures and the changing cybersecurity-related risk associated with their suppliers.

Even after the pandemic subsides, the need for real-time risk monitoring in the extended digital supply chain will persist, especially as cybersecurity attacks grow in sophistication.

New Technology for Physical and Digital Supply Chain Risk Management

When it comes to monitoring risk associated with multiple tiers of suppliers, the majority of businesses are still way behind. According to Gartner, only 27% of companies perform ongoing third-party monitoring and only 2% directly monitor their 4th and 5th party suppliers. Although companies know they’re vulnerable to disruption by a sub-tier supplier, not enough are being directed or given the tools to actively monitor them effectively.

Historically, the majority of businesses attempt to identify, assess and manage supply chain risk manually and only periodically. This is because, previously, automation technology focused on making sense of large amounts of extended supply chain ecosystem data has not been up to the task. Much has changed. The global machine learning market was valued at just $1.58B in 2017 and is now expected to reach $20.83B in 2024, growing at a CAGR of 44.06%. New AI and machine learning-based technology is emerging rapidly and changing the game. This new technology can immediately illuminate risks across all tiers of a global supply chain because data on tens of millions of suppliers is continuously monitored from both a physical and digital supply chain perspective and across numerous risk factors.

Incorporating AI-powered solutions into your supply chain risk management strategy can automate the identification of risks that exist deep within a supply chain. In addition, adopting this technology ensures that an organization has continuous, real-time information to inform ongoing risk management efforts and identify problems before they threaten the business.

There is no way to know when the pandemic and its resulting implications will cease. Or when and where the next global event will happen. Looking ahead, successful businesses will be ready to continue functioning in a safe and secure way regardless of what issues they face. Supply chain-related blind spots and resulting disruptions can pose major complications for organizations that aren’t able to effectively identify and map risk. COVID-19 has driven a greater sense of urgency to shore up these problems. New technology for automated, continuous monitoring of supply chains end-to-end presents a new path toward operational resilience, business continuity, and overall health.

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Jennifer Bisceglie is the CEO of Interos, the first and only business relationship intelligence platform to protect enterprise ecosystems from financial, operations, governance, geographic, and cyber risk in every tier of enterprise supply chains, continuously.

disruptions

Preparing for Future Supply Chain Disruptions: Insights from the Field

Organizations across all industries—from automotive, consumer goods, and pharmaceuticals to transportation, electronics, and oil and gas—have felt the disruptive effect of the coronavirus pandemic. Turning the global supply chain on its head, COVID-19’s impact has cut across multiple facets of international trade, including manufacturing, import/export, logistics, compliance, and supply chain management. This disruption has been a wake-up call for organizations worldwide, prompting them to assess their readiness to respond reliably, expediently, and effectively to rapidly evolving risk factors going forward.

Disruption Is Inevitable

Whether driven by an unprecedented pandemic or events that are more familiar, like trade wars or frequent duty and tariff changes, future disruptions to the flow of goods are unavoidable and companies must be as prepared as possible. Case in point: on June 29, the amendments to the Export Administration Regulations (EAR) published by the U.S. Department of Commerce, Bureau of Industry and Security (BIS) came into force, impacting U.S. companies that export goods, software, and technology to China, Russia, and Venezuela.

A few days later on July 1, a new free trade agreement entered into force as the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement (NAFTA). While the USMCA is designed to provide “significant improvements and modernized approaches to rules of origin, agricultural market access, intellectual property, digital trade, financial services, labor, and numerous other sectors,” companies must respond efficiently to changes in import duties, tariffs, and rules of origin verification procedures in order to avoid compliance issues.

The current government’s uncertain trade relations with China, BREXIT’s unfolding impact on U.K. trade, and evolving pandemic predictions are just a handful of factors that may unsettle global supply chains going forward. With disruption an unavoidable consequence of doing business in 2020, successful companies are securing their supply chains by prioritizing operational responsiveness, agility, and adaptability in order to keep goods flowing while avoiding compliance violations and penalties.


Are You Prepared?

Today’s businesses are keenly aware of the importance of keeping a close eye on their sources of raw materials, parts, and finished products to ensure logistics costs do not erode overall profit margins. But COVID-19 caught many companies off guard, throwing their sourcing strategies and revenue flow into crisis.

Descartes’ 2020 Global HTS Classification Benchmark Survey of importers, shippers, logistics and supply chain operators, and customs brokers around the globe analyzed the impact of the supply chain disruption on companies’ operations and ascertained how they are addressing issues for the long-term.

The survey found that 35% of respondents were forced to research alternative suppliers or locations as a result of the pandemic. An additional one-third felt increased pressure to identify ways to reduce duty and tariff costs in order to shore up the shrinking bottom line.

Lessons Learned: Count On Technology

For those survey respondents forced to look for alternative suppliers due to COVID-19, many also looked to advanced technology solutions to address the more demanding workload and support the shift to a distributed workforce and the ‘remote working’ model.

In their leaning towards more advanced technology, approximately three-quarters of respondents were aiming to establish a workflow process for mass classification and to create an audit trail for proof of due diligence; sixty-eight percent were seeking a collaborative online classification process, while 55% sought configurable classification rule sets for different industries and product categories.

The Descartes survey also found that the majority of companies—not just those impacted by COVID-19—are adopting more advanced technology to enhance responsiveness to change and to increase resiliency. Regardless of the number of SKUs classified annually, businesses are recognizing the value of additional layers of protection against the unknown to help ensure their import operations remain viable during turbulent times.

Keep Agility and Responsiveness Top of Mind

Prior to switching to av more automated and integrated research and classification solution, most respondents surveyed were using labor-intensive and error-prone manual methods; a massive 81% were accessing multiple government websites to access classification data and 46% were looking up information in hardcopy books—an unacceptable drain on valuable time and resources and a serious impediment to pivoting swiftly in the face of disruption.

Respondents using advanced global trade intelligence solutions, with up-to-date tariff data accessed from a single system, reportedly accelerated the classification process by 30% to 100%. This increase in speed is a critical piece of the preparedness strategy, as companies aim to focus on agility to keep goods moving during market volatility.

Future-proof Your Organization

New disruptions to the global supply chain may be just around the corner. A proactive global trade intelligence strategy will help organizations continue to drive commerce while ensuring trade compliance in the face of inevitable change:

1. Take advantage of more advanced technologies to maintain compliance efficiency and accuracy as workload demands increase, as well as to better manage a more distributed workforce.

2. Look to technology solutions to increase the resilience and responsiveness of trade compliance programs.

3. Ensure a single point of access to research complex international trade information, including up-to-date HTS codes, duties and tariff treatments, rulings, and explanatory notes.

4. Use a robust solution to effectively exercise and establish a “standard of reasonable care” for product classification.

With the impact of COVID-19 on sanctions and export controls still not fully known, compliance professionals should re-evaluate their global trade compliance strategy, honing it to boost adaptability, agility, and responsiveness to change. By leveraging advanced global trade intelligence technologies, companies can better insulate themselves from the fallout of future supply chain disruptions while minimizing duty spend and achieving higher trade compliance rates in the process. For compliance professionals everywhere, the age-old Boy Scout adage rings true: Be prepared.

resilience

The Importance of Supply Chain Resilience

Acknowledging potential weaknesses in your supply chain before they are exposed by elements beyond your control is of critical value. With current events in mind, managing future supply chain disruptions will be an integral component of corporate strategy. Calling it Supply Chain Resilience, Supply Chain Disruption, or Business Continuity Management (from the ISO 22301 standard) does not affect the necessity of having strategies in place that may make the difference between following or leading in a disrupted economy, and even between surviving or folding.

To identify potential soft spots, a review should not be limited to a single product flow or single supply chain element. For any company, the next big disruption does not have to be a pandemic; it can be something minuscule on a global scale, yet have the same devastating effect on the ill-prepared in particular trade lanes or in a particular industry. Unpredictable is not a reason to be unprepared. Creating supply chain resilience is a holistic exercise that involves more than just a few savvy logistics people. HR, finance, compliance/legal (to name a few) are all stakeholders in a healthy case of business continuity management.

How then to build a strategy? Like any other strategy, the process seems logical: review, assess, and mitigate. In this particular case: 1) review your tradelanes, products, and materials flow by matching them against risk categories (i.e., labor, business risk, global trade, nature, and materials), 2) assess risks for each combination, and 3) mitigate risks by either changing behavior now or planning for alternate (sourcing) options should the anticipated risks become reality.

Trade Lanes and Risk Categories

The relevant components to review within the supply chain include the importing and exporting country or countries, the manufacturing locations, the finished goods, and the (raw) materials. Ideally, for finished goods and materials, the associated Harmonized System (HS) codes are made available. Scratch what does not apply and move to the following step where each of the ‘inputs’ is categorically reviewed.

As mentioned, this should not be an exercise limited to supply chain professionals. For example, labor risks can be associated with the likelihood of strikes, wage volatility, and the availability of appropriate labor resources—not necessarily areas that keep the supply chain brain occupied every day.

In a similar fashion, other resilience elements expand across different areas of expertise. Business risks relate to cybersecurity, corruption, counterfeit products, and the chance of entering into business with bad actors that are on (any of the) denied party lists.

Global trade accounts for the compliance requirements related to the shipment of goods (i.e., licenses, documentation, permits, etc.), associates the products with the various duties and taxes, and identifies if Free Trade Agreements(FTA) apply and how to qualify for preferential treatment.

Arguably the most unpredictable, but not the least expected risk to account for, is nature. It’s important to identify the various kinds of disasters that may hit: natural hazards, pandemics or epidemics, flooding, earthquakes, hurricanes, volcanic eruptions, landslides, or drought can all play parts.

Lastly, consider materials. Understanding the market comes with insights into scarcity, sourcing locations, and price fluctuations.

Risk Assessment

Risk assessments match the input with the risk categories. For example, how vulnerable is the manufacturing location when it comes to labor regulations, corruption, or flooding? Is there an FTA in place that could potentially lower the import duty burden? Where in the supply chain can a cyberattack be most expected? In short, some homework is in order to create a thorough risk profile.

For many components, the sources are readily available, such as the Corruption Index at transparency.org, labor statistics on Statista or NationMaster, or duty rate information from the various global trade content providers (or the WTO).

Building Resilience

As with cyber-security risks (PEN tests) or a regular laptop virus scan, supply chain risk assessments will point out the components that need immediate attention or, in this case, are a high priority for alternate sourcing or routing options. It’s then time to build that resilience.

Look for options by analyzing the market and tradelanes. Mine import and export data to identify alternative sources for goods and materials, even manufacturing locations. Map out alternative routes for products to get where they need to go. Document the reasonable options and share with as many people as possible—preparedness is, of course, an all-inclusive strategy.

Next and where possible: test run! Re-route shipments temporarily or source occasionally from a new supplier; in other words, make sure the alternative options are viable. In addition, communicate with external sources that would be part of continuity plans. Make them aware they are part of these plans; put people or suppliers on a retainer and try to agree on terms before disaster strikes so the projected costs can be anticipated better.

Lastly, keep those alternate plans up to date; otherwise, it may be too late to create and execute on alternate alternative plans.