Reducing global supply chain risks and seizing opportunities

Global supply chains are currently undergoing a profound transformation, driven strongly by financial uncertainties, geopolitical tensions, climate change, as well as increasing demands for sustainability and new legal requirements. Companies face the challenge of making their supply chains more adaptable, environmentally friendly, and robust to remain competitive in a rapidly changing global market.

To turn these challenges into opportunities, digital platforms help with a comprehensive and up-to-date information pool, automated analyses, and prospectively also with artificial intelligence. We discuss this with Heiko Schwarz, global supply chain risk advisor at Sphera, a company that offers integrated solutions for sustainability and operational risk management.

Mr. Schwarz, global supply chains are currently under enormous pressure. What are the main reasons?

Heiko Schwarz: The current developments are influenced by a multitude of factors. The reality is that global supply chains are becoming increasingly interconnected and vulnerable. As a result, companies are increasingly confronted with financial, ecological, political, and operational risks. These include financial strain, supply disruptions due to natural disasters, or concerns about compliance with sustainability regulations.

Which risks are particularly relevant at the moment?

Heiko Schwarz: There are a number of risks that companies need to consider, but some stand out. These include financial instability within the supply chain, delivery delays, increasing sustainability requirements, barriers to cross-border trade, and quality issues with materials and components. Our Supply Chain Risk Report 2025 shows that these challenges are evolving and affecting companies on various levels.

Can you give us an example of financial instability in the supply chain?

Heiko Schwarz: Yes, of course. The financial vulnerability of partners in the supply chain poses a significant risk to operational continuity. Germany recorded the highest number of insolvencies in 2024 in almost a decade - an increase of 16.8 percent according to the Federal Statistical Office. Internationally, we also see an increase in financial difficulties among suppliers. Early warning indicators show an increase of 11 percent, while insolvencies globally have risen by 48 percent and force majeure declarations by 61 percent. Companies should not only react when they are affected. Rather, they should be prepared and able to respond immediately in the event of an emergency, instead of being driven by events.

How do such instabilities and risks affect delivery times?

Heiko Schwarz: Delivery delays are one of the biggest challenges. Although this risk has decreased by 7 percent overall, companies still experience an average of 14.8 delivery disruptions per year. External factors such as natural disasters, strikes, or infrastructure problems exacerbate this situation. Think of the floods in Europe last year - they led to temporary plant closures and weeks-long disruptions in logistics. Painful revenue losses and increased, unplanned costs due to remedial measures for the disruptions unnecessarily burden companies' profits.

Besides financial instabilities, you speak of natural disasters and the related and necessary sustainability. What impacts do you see in this regard on companies?

Heiko Schwarz: Sustainability requirements have tightened significantly in 2024, especially in Europe. Companies are under increasing pressure to make their supply chains more transparent and environmentally friendly. For example, the new EU Deforestation Regulation (EUDR) has introduced additional requirements that require increased certification of suppliers. These requirements not only have financial implications but can also significantly affect business operations. If just one link in the supply chain cannot meet the requirements, entire industries can be significantly affected. Think of the wood processing industry and its customers in the construction or furniture industry. If something is not right with deforestation or reforestation of forests or with the production of adhesives, there can be a shortage of particle board. Consequently, there is quickly a shortage of shelves, beds, or building materials for house and apartment construction. However, if a company in the supply chain has made strategic preparations for such cases, it will be far less affected by such incidents and can even derive an economic advantage from it: i.e., ideally increasing sales and market share while others "close down" and are unable to deliver.

Let's talk about quality risks. How do they affect the supply chain?

Heiko Schwarz: They have enormous impacts and they are highly current. Quality problems in supply chains have increased by 22 percent in 2024. The main reasons are the relocation of suppliers, for example, through nearshoring or friendshoring, or stricter hazardous materials regulations. A particularly worrying trend is the increase in defective component deliveries by 14 percent. This leads to production delays, rising costs, and in the worst case, extremely costly and image-damaging product recalls. Additionally, the number of hazardous substances in deliveries increased by 54 percent, leading to increased regulatory inspections, fines, and potential reputational losses.

What lessons can companies learn from these developments?

Heiko Schwarz: The most important insight is that companies must proactively manage their supply chains and leave nothing to chance. Close collaboration with suppliers, transparent communication, complemented by data-based risk analysis, are crucial aspects to reduce these risks. Those who break down silo thinking and apply an integrated risk assessment can not only minimize risks but also unlock new business and innovation potentials.

In conclusion: How do you assess the future risks and opportunities in global supply chains?

Heiko Schwarz: In general, complexity will undoubtedly continue to increase. Additionally, companies face growing geopolitical uncertainties, climatic challenges, and increasing sustainability requirements. This area of tension will not diminish, and companies that respond early to changes, develop flexible strategies, and actively manage risks will seize opportunities and expand their competitive advantage in the long term, rather than laboriously, time-consumingly, and expensively ironing out supply chain problems.