Strengthen global value chains through risk management

APEC economies have developed a strong foundation to deal with the COVID-19 crisis, but more needs to be done to enhance their resiliency in global value chains, according to a policy brief by the APEC Policy Support Unit.

“Building and strengthening resiliency is the top priority for firms involved in global value chains,” said its senior analyst Dr Akhmad Bayhaqi.

“The economy-wide and global implications brought on by disruptions to supply chains resulting from the COVID-19 pandemic suggest that governments need to support firms in managing such risks,” he added.

The policy brief, titled Managing Risks in Global Value Chains, analyses the ability of the APEC region and its peer international groupings to respond to disruptions and to quickly return to normal operations.

Using a value chain strength index, the policy brief measures the strength of economies and groupings against logistics and infrastructure risks, natural disaster risks, market risk, s political risks and regulatory and policy risks.

The policy brief finds that while APEC economies perform moderately well, the region falls slightly behind its peer international groupings in terms of value chain strength.

“We found that there is a significant disparity within the region with almost half of the economies registering a rather weak performance in terms of value chain strength,” Dr Bayhaqi explained.

“The uneven level of development across economies in APEC affect the region’s ability to rebound quickly in times of systemic supply chain disruptions.”

The APEC region could also strengthen their resiliency against natural disasters and health-related calamities by, for example, improving the numbers of physicians and bolstering health expenditure.

“Global value chains have increasingly become more prevalent, more integrated and more connected, increasing businesses’ exposure to certain risks,” said APEC Secretariat executive director Dr Rebecca Sta Maria.

“This is why incorporating risk management in supply chains is crucial, especially when dealing with disruption the scale of this pandemic,” she added.

Maria also said that a risk management framework should take a holistic approach, covering each part and every player in the supply chain network including firms, small businesses, governments and consumers.

“Looking ahead, we have to put in place measures where we ensure the smooth flow of supply chains in times of crisis, especially for medical goods, essentials products and services,” she concluded. – Feb 27, 2021

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