The speed at which Covid-19 spread around the world also highlighted the potential vulnerability of some industries when borders are closed and supply chains are not ensured.
The pandemic halted global trade. Therefore, it stress-tested the capacity of countries to build internal supply chains (i.e. the rapid development of national businesses with solid technological and manufacturing bases). The capacity of supply chains to distribute goods and services was also under pressure, where the minimum stock level strategy materialized into a strong weakness. This means that trade players will be in the need of a 360 degree view of the robustness of their partners — both suppliers and buyers.
With 80% of the active pharmaceutical ingredients used in Europe manufactured in Asia, mainly in China and India, (no mention of Huawei) Western countries need to rethink their trade and self-sufficiency in terms of vital goods This also raises the question of national sovereignty on key industries. A strong relocalization process of all industries can be expected, provided that consumers are willing to pay the extra price for the higher workforce costs. We may witness (and also rejoice at) the return of new lowly-qualified jobs to Europe — with the knock-on effect of reducing unemployment, increasing wages but also inflation. Businesses will endeavor to become more resilient, sometimes at the expense of profits. Businesses may need to change the way they manage their stocks. Business stability/continuity will prime over quarterly results.
The acceleration of digital transformation for both employees and clients is now an accepted fact. Development budgets will be increasingly targeted at digital tools.
FaaS “Factories as a Service”:
Companies around the world learned that they can quickly stop the manufacturing of a product and focus on a very on-demand product, such as Intensive Care Units and Masks in the light of Covic-19. 3D printing could represent the core of the ‘new factory’ capabilities. We should see the rise of 3D printing, fablab and local factories.
The economic crisis we’re living in today will stress supply chains to rupture for a lot of businesses. In order to rebuild these, businesses could turn to marketplaces, and digital ones will have a trump card to play in that situation. Marketplaces could therefore expand, connecting manufacturers and suppliers once the lockdown is over. Offshore activities will be reviewed and minimized in order to lower business interruption risk. Global trade, exchanges and therefore cash flow dynamics are bound to change. States will have a greater presence in businesses and sovereignty is set to have a greater impact. Companies could be nationalized (no mention of credit insurance).
Global trade and exchanges will be greatly diminished.
Companies could be nationalized — a move that in some countries may also be extended to credit insurance beyond the ECAs.
The economy will face an inflationary risk, which will put pressure on households. New financial products will be launched. Borders will be less open and import taxes will increase. The volume of exports will drop, but in an uncertain world the need for export credit insurance will increase.
Cooperation dynamics between emerging countries and developed economies might change. Businesses will have to adapt their geographical activities to the new global situation. Asia could remain an area of strong growth and should therefore be strengthened. Domestic activities are set to increase.
Logistics and health will be increasingly viewed as strategic sectors and protected as such by countries. This has already started in Singapore, for example.