As the corona virus spreads around the world and the death toll rises, the varying reactions by the various governments show their differing levels of concern. This goes from President Trumps ‘there’s no problem’ stance to the Swiss authorities ban of public events with more than 1000 attendees, affecting sports events, concerts and the internationally well known annual car show in Geneva.
In the short term the COVID-19 could well lead to shortages of materials around the world and hence price increases. In the medium term it is likely that global supply chains will be reconfigured, since many industries now find out that they are (too) heavily dependent on China as a major supplier. This will not only affect strategic purchases, but also many indirects which are sourced in China.
Most businesses are likely to be impacted by this still developing crisis in one way or another. Emerging trends might include sourcing ‘closer to home’ and multi-supplier strategies as opposed to single source. Going forward ‘price’ will still be relevant, but continuity of supply will be increasingly important, even if this comes at a higher cost. And while big multinationals will be able to adapt and absorb the cost increase, this will be much more difficult for their smaller suppliers along the supply chain. Inevitably this is going to lead to higher prices for end users.
And it could force some businesses into bankruptcy, particularly smaller ones, lower down the supply chain, meaning that jobs will be lost and potentially driving the global economy closer towards or into recession. How governments respond is therefore crucial: Don’t take any action and let the virus run its course at the risk of more infected people and likely deaths, or clamp down too hard and too early with restrictions at the risk of throttling the economy.
Either way, the authorities have to make some tough decisions which are going to affect all of us. And this also shows once again, that we should not take growth and prosperity for granted. Black swan events such as the COVID-19 Virus will always happen, mostly exactly when we expect them the least.
The grumpy older man 