Craft Focus - December 2020/January 2021 (Issue 82)

86 Supply chain risk Lee McDarby, managing director of Corporate Foreign Exchange and International Payments at moneycorp, discusses how to navigate supply chain risk in the retail sector The past year has put significant pressure on the retail industry, from a global pandemic to the looming Brexit deadline. However, with many British retailers continuing to import and export goods, one way they can take care of their bottom line and mitigate risk is by leveraging foreign exchange (FX) mechanisms to manage market volatility. SUPPLY CHAIN DISRUPTIONS The impact of COVID-19 on the retail sector shouldn’t be underestimated. The beginning of the year saw businesses stockpiling ahead of Brexit. However, these stockpiles have been exhausted and supply chains are now strained. As a result, already depleted supply chains have had to try and play catch up before we leave the European Union (EU), and Brexit pre- planning has unravelled. Supply chains also have to contend with local lockdowns that are likely to include border closures. With these restrictions in place, it is likely that supply chains will be disrupted, causing businesses to collapse if they don’t have contingency plans in place. Concurrently, British retailers also need to deal with the upcoming Brexit deadline. Should we exit the EU with no deal, it is likely that higher financial costs on businesses could become unavoidable, and stockpiling will be of the utmost importance. Initially, businesses should expect to lose supply from the EU, and we’ll see a lot of uncertainty as deals are negotiated. It may be a good option to consider looking into alternative suppliers from outside the EU, which in itself will mean businesses will need to create multicurrency accounts that could increase the risk businesses face, if not handled properly. On the other hand, a deal still leaves us with a number of considerations that will need to be made to mitigate risks. Firstly, the impact on companies across the UK will be dependent on how soon a deal is reached and what the deal means for businesses. Much like a no deal, it is likely to lead to higher financial costs for businesses and initial delays in supply chains, while industries initially navigate the new framework. Again, stockpiling will also become important, allowing companies to have a contingency plan in place for the worst-case scenario, so they can survive the initial uncertainties.

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