The European Union’s Digital Operational Resilience Act (DORA) takes third-party risk management very seriously. Upcoming regulatory compliance requirements under DORA will require financial institutions to have a thorough understanding of the end-to-end supply chain and enhance the way they conduct Third Party Risk Management (TPRM) by January 2025.

Many financial services firms risk having insufficient operational resilience intelligence on their core ICT suppliers and will need to ramp up their efforts to become compliant or face significant penalties for non-compliance. 

Here are some key pointers to help you and your partners meet regulatory requirements painlessly.

Visually map out key functions within your business

Begin by identifying each vital part of the organisation and then break it down into: the PEOPLE who are responsible for managing the function; the PROCESSES that underpin its daily operation; the TECHNOLOGY (systems, data, information) which enables the processes and management; and THIRD PARTIES, who supply you with the necessary systems and solutions.

As a first step, this will provide a clear overview of how the business operates and how functions overlap and interconnect. It lays the stage for the next critical step, and to build operational resilience across the supply chain.

Mapping third party risks  

Every moving part within the organisation will have some level of operational risk attached. For example, could be ‘key-person’ risks. These occur when just one or two people in a function have access to critical system knowledge. This leaves them and the function highly exposed. Or perhaps there are functions that rely on third-party systems to the extent that there are no viable manual or internal workarounds in the event of outage. Such third-party risks are particularly important, because exercising control over them is less straightforward than risks arising from in-house activities.

Successfully mapping such risks will depend on collaboration between vendor owners and subject matter experts across the organisation: professionals who are close to the coal face and have a detailed understanding of potential risks and associated impacts and can prioritise accordingly.

Identify well-governed risk treatment plans  

Having identified risks in each functional area, and the potential impact they might have on the business’s resilience posture, it’s time to develop well-governed risk treatment plans. Begin by securing sign off on remedial actions from the board; senior buy-in is essential to underline the importance of implementing the plans.

Each plan should summarise the impact of the risk to resilience, specify mitigation methods, identify who is responsible for implementation, and set deadlines for action. Ongoing monitoring and reporting will assess the effectiveness of implemented measures so they can be adjusted as necessary.

Ensure that staff are trained on DORA  

With the January 2025 deadline looming, now is the time to begin training employees on DORA and how it will affect their roles and responsibilities. The sooner people are made aware of the implications, what is required of them and how it will impact their day to day activities, the more time there will be to strengthen these practices and really bed them in before DORA is live.

There are a range of DORA training courses that provide the know-how and confidence to navigate the route to DORA compliance, as well as e-learning courses that cover essential compliance knowledge.

Develop an Operational Resilience testing framework

It is vital to regularly test threat-led testing on specific components and systems across all essential functions to calibrate assumptions made about their resilience. By integrating the outcomes of test exercises into a continuous risk assessment, organisations can enhance their resilience posture, even as external and internal threats continue to evolve.

Remember that operational resilience is an ongoing process. Regularly review and update your framework to adapt to changing circumstances and emerging risks.

Implement Governance Risk and Compliance (GRC) Tools

Third Party Risk Management is of the utmost importance to operational resilience. These tools act as a single source of truth for all vendor relationships, as well as highlighting the associated risks and mitigating controls in place. Nominate vendor ‘owners’ within the business who can use GRC tools to oversee the relationship and mitigate risk for each supplier.

At the same time, create and maintain a vendor directory, which provides complete visibility of your vendor ecosystem and the associated risks so you can make informed decisions. With all the relevant information in one central repository, you can streamline the risk management process and reduce the potential for human error.

Finally, instead of random manual checks, implement an automated Third Party Risk Management (TPRM) platform to manage the ongoing assessment of risk. This will take on the hassle of repetitive tasks and continuous verification, ensuring a consistent approach to vendor-related risk. 

For example, in the case of a vendor questionnaire, it begins with automation, but then enables individuals to thoroughly review and evaluate the provided responses, as well as the findings from any compliance audit report. Leveraging pre-mapped controls can save organisations significant time compared to carrying out manual assessments of third parties. Features like flagging and risk scores measure supplier performance, and reports provide real-time visibility into how third parties are impacting the risk and security posture of an organisation.   

By deploying such GRC tools, organisations can minimise vendor risks and the residual operational impact of any outages.

As the clock continues to tick down to January 2025, the sooner you begin addressing DORA, the better. By following these simple steps, you can ensure that you’ll be well placed to meet compliance standards and build operational resilience measures across the entire supply chain. 

The world’s largest aircraft manufacturers are continuing to experience a run of bad luck in their supply chains. 

Airbus faces delays 

This week, French manufacturer Airbus announced an adjustment to its year-end aircraft delivery. The adjustment also affected company’s earnings before interest and taxes (EBIT), and free cash flow (FCF). Currently major supply chain issues are affecting the manufacturer’s operations and ability to deliver aircraft on multiple fronts. 

In the statement issued on June 24, Airbus blamed persistent supply chain issues for a shortage of engines, aerostructures, and cabin equipment. The shortages are forcing the company to reduce the number of aircraft it plans to deliver in 2024 to around 770 aircraft, compared to the 800 aircraft that it had previously expected to send to customers. 

Additionally, Airbus was planning to ramp up production of its A320neo aircraft to 75 per month. Airbus’ supply chain disruption have also delayed this initiative, with completion expected in 2027 rather than 2026. 

Strikes with no end in sight 

Both Airbus and its main competitor Boein faced additional delays this week due to disruptions in their supply chains. Reuters reported on June 25 that, after a five week-long strike by workers at Montreal-area Safran SA, management and the Confederation des syndicats nationaux union are no closer to reaching an agreement. 

Workers picketed on Tuesday outside the factory in Mirabel, Quebec, where Safran has been running operations using personnel non-striking, non-union workers, a company spokesperson told Reuters.

Safran has told the union that it has made its final offer a 14.5% raise over three years, while workers represented by the union have said since the start of the strike that they need an estimated 22% salary hike. Safran manufactures landing-gear components used in both Boeing and Airbus jets.  The company reported €2.7 billion in profit last year. 

EU deadlines extended 

Due to the pervasive nature of the supply chain issues, the European Union this week also rolled back the deadline for the inclusion of new safety features on all newly-built aircraft. Commercial aircraft manufacturers will be granted a further 18 months to meet the new requirement, shifting the deadline back from 1 January 2025 to 1 July 2026.   

The safety features are designed to use energy calculations during approach and landing to predict the point at which an aircraft will come to a halt, and compare this with the runway length, in order to identify any risk of overrun. 

The European Union Aviation Safety Agency announced after its investigation that several type-certificate holders have faced “significant difficulties” due to supply chain disruption.

New post-Brexit rules governing the biosecurity of fresh produce entering the UK will not only see disagreements over increased costs and operational viability kicking off. The consequential delays could see fruit and veg literally going off while waiting for an ‘all-clear’ certificate.

Challenges posed by the BTOM

The new Border Target Operating Model (BTOM) classifies all plant and animal products coming from the EU and puts them into three risk groups: high, medium and low.

In its wisdom, the UK government has placed many fruit and vegetable imports into the medium risk category, meaning multi-page documentation must be provided confirming its provenance and safety at the new border points, which opened at the end of April.

With most fresh produce arriving in the UK in mixed loads, questions have been raised about potential delays and how to unpick the consignments in a timely fashion, particularly as there are question marks over the numbers of inspectors mandated to issue phytosanitary certificates at the border.

Import costs could pass down the supply chain to consumers

The Fresh Produce Consortium (FPC) argues that the process will add £200 million in additional import costs across the fresh produce supply chain, calling it “a crippling blow to a sector already grappling with unprecedented challenges.” It’s likely fees that will negatively impact small fruit and veg enterprises. Ultimately, organisations will end up passing on those costs to consumers.

Supporters of the legislation argue that the restrictions empower businesses to manage the integrity of the product through the supply chain. Regular checks from UK border controls would potentially cut down on the paperwork and maintain the steady flow of fresh produce from the EU. However, every time a product is stopped or touched, it adds cost and delay. Neither are affordable when it comes to perishable produce.

When we talk about ‘farm to fork,’ fresh produce ceases to be so when it does not arrive in a just grown or picked fashion.

BTOM may prove to be good news for British growers, but what about non-native fruit and veg? And what about choice for British consumers who will have to go without or pay more for the privilege of having not-so-fresh produce on their plates?

Either way, these post-Brexit fruit and veg rules need fresh consideration rather than unnecessary composting. 

Shelley Pierre is commercial director at leading European pallet pooler IPP. The IPP pool is a leading rental provider of pallets and boxes in fast moving consumer goods and industrial supply chains.

Food supply chains around the world are facing an array of challenges, even as the legacy of COVID-19 fades. Geopolitical disruptions are creating delays and increased shipping costs. At the same time, inflation and the rising cost of living have put pressures on supply chains to combat cost. 

Above all, of course, the worsening effects of the climate crisis continue to create supply chain instability. Nowehre is this happening more so than in the food and agriculture sector. According to the EPA, “climate change is very likely to affect food security at the global, regional, and local level. Climate change can disrupt food availability, reduce access to food, and affect food quality.” Changes in rainfall, humidity, temperature, and other cyclical weather patterns (as well as the increasing regularity of extreme weather events) have the potential to “result in reduced agricultural productivity.” 

Global food supply chains are under threat 

This increasing instability in global crop yields is already threatening the availability of crops around the world. 

Last year, in India, tomato prices surged by over 300%. This is thanks to climate change-related flooding in major tomato-producing Indian states like Andhra Pradesh, Maharashtra, and Karnataka.

2023 was also the worst year for grapes in over 30 years. Droughts and wildfires in South America and an overabundance of rain in Europe slashed yields in some of the world’s largest grape-producing mountries, according to estimates by the International Organization of Vine and Wine (OIV). 

Potatoes are also severely threatened by climate change if we continue at our current trajectory. Data suggests that global potato yields could fall by between 18% and 32% within the next 45 years.

Food insecurity in Europe could be closer than we think

In their current configurations, European and UK food supply chains are vulnerable to the worsening effects of the climate crisis. A little less than half of the food on plates in the UK is produced domestically, according to the British Government’s 2021 food security report. Despite relatively strong domestic production, the report stresses that the UK is reliant upon “diverse and longstanding trade links” in order to “meet consumer demand for a range of products at all times of the year.” 

Other countries in Europe also rely on imported goods to guarantee year-round supplies of fruit and vegetable produce. These supply chain links are especially vulnerable to climate change disruption. For example, just under 40% of Germany’s fresh fruit and vegetable imports come from developing countries. These are areas of the world being disproportionately affected by climate change and experiencing much more severe food insecurity. Climate change-related food insecurity could cause civil unrest in countries like the UK within the next few decades. Other nations in Europe are likely to be similarly affected, unless the region reevaluates its approach to agricultural procurement. 

Interestingly, not only is the process already underway somewhat organically, but a widespread shift in the way that Europe sources its produce could remove some strain on other regions whose food insecurity is at least partially linked to exports, like India. 

Pressures on global supply chains were expected to abate along with the effects of the pandemic. However, it seems as though the year (and decade) ahead will be defined by a near-constant state of disruption. The climate crisis is only expected to exacerbate this increasingly unstable state of affairs. 

As a result, many governments and companies (across multiple industries) began the process in late 2023 of nearshoring (or friend-shoring, in more political cases) their supply chains. 

Shorter supply chains and a return to seasonal food 

By moving closer to home, organisations reduce the risk of disruption to their procurement process. This is the case whether the goods moving through the value chain are silicon semiconductor chips or corn tortilla chips. 

This phenomenon was already present in Europe pre-pandemic. A report released in 2016 by the European Parliament found that shorter food supply chains where “farmers sell their produce directly to consumers or with a minimum of intermediaries,” were flourishing across the EU, both in rural and urban areas. These shorter, localised food supply chains, the report’s authors hoped, could “represent an alternative to conventional longer food chains.” 

Now, this trend is expected to accelerate further under pressure of mounting supply chain disruptions. This shift away from extended, complex supply chains “where any one of a multitude of moving parts could give retailers a pricing headache” has a price, however. According to Carlos Cordon, a professor of strategy and supply chain management at the IMD, this shift “militates against all-year-round availability.” 

Cordon believes that 2024 could be the first year when European consumers “find themselves transported back to a time when out-of-season goods were not available from their local stores.” Retailers throughout Europe may not be able (or willing) to source goods from the other side of the world. 

As a result, Europe’s food supply chains could get significantly shorter. This would increase their stability, but at the expense of the availability of out-of-season produce.

There could also be major benefits from a sustainability perspecive. Food transport has been estimated to account for one-third of the sector’s greenhouse gas emissions. As an added bonus, this reemphasis on seasonality could be the key to reducing carbon emissions and food waste while addressing food insecurity. 

The months-long drought affecting the Panama Canal may be coming to a close. The return of annual rains are predicted to raise water levels throughout the 51 mile-long stretch. With the end of the drought, optimistic predictions could see shipping volumes return to their normal levels. If that happens, it would ease one of the most severe pain points faced by supply chains in recent years. 

Since Summer 2023, a brutal drought caused water levels in one of the world’s busiest waterways to drop to historic lows. 

The reduced water levels have cut the rate at which ships can traverse the Canal in half. By December, long queues developed. According to reports, some captains paid as much as $4 million to jump to the front of the line. Those unwilling or unable to pay inflated rates have been forced to make a difficult choice between weeks spent waiting in line and long, inefficient journeys around the southern tips of either Africa or South America. The drought has also coincided with Houthi attacks in the Red Sea, further disrupting global shipping. As a result the cost of container shipping nearly double year-on-year in Q4 2023.

The end of the drought in the panama canal

Now, however, the start of Panama’s rainy season could see the trade chokepoint resolve itself. The news has been welcomed as global supply chains brace for the busiest months of the year. 

According to IMF PortWatch, the number of vessels traversing the Canal averaged 25 per day in April. That’s a significant jump from the record low of 21 in January. However, it’s still a long way below the pre-drought average of 35 ships. 

The upward trend is expected to continue, however. The canal’s governing authority recently announced plans to lift the number of daily transits through the canal to 31 in the second half of May. Then, in June, the figure will rise again to 32.  

A report by S&P Global Market Intelligence noted that this rise in water levels “should steadily lift the restrictions to global trade resulting from canal disruptions since last year, which is particularly important ahead of the peak shipping season.

“By the end of April, rain is going to begin and we’re going to have a lot,” Argelis Moreno Lopez said earlier this month at a conference at the University of Houston, Bloomberg reports. “That will reverse the situation and go back to normal at the end of the year or next year.”

Around the world, supply chains are under mounting pressure, both internally and externally. Geopolitical conflict, economic pressures, and the climate-crisis are creating an environment where the risk of disruption is almost constant. 

At the same time, staffing shortages are exacerbating the fact that the demands placed on supply chain and procurement teams are significantly increasing. A report by McKinsey found that, in 2023 alone, the workload of a typical procurement function increased by 10%. As procurement leaders and supply chain managers fight to drive efficiency and strategic wins for the business amid turbulent times, here are the top 5 pain points we see creating headwinds for the sector. 

1. Geopolitical disruption 

Shipping in the Panama and Suez canals is at a historic low, as a climate change driven drought and Houthi military action, respectively harm the flow of shipping. Transits along major shipping lanes have increased by an average of 1-2 weeks, with more than 600 vessels chose instead to travel around the Cape of Good Hope to avoid the Red Sea in March alone, according to project44 research. 

The war in Ukraine, US and Chinese posturing over Taiwan, and the ongoing genocide in Gaza can all be expected to ratchet up political tensions around the world this year, further raising prices of raw materials, oil, and other freight. 

Friend-shoring is becoming increasingly common, as supply chains are relocated to parts of the world that are less diplomatically contentious. However, this process takes time. For example, the US is in the process of divesting its semiconductor supply chain from China by investing in building up the Filipino and Malaysian manufacturing sectors. Nevertheless, this is not an overnight process. 

2. Extreme weather 

The effects of the climate crisis are only going to get worse. Droughts (like the one in Panama), wildfires, flash flooding, hurricanes, and other extreme weather events are going to not only disrupt global trade routes but interfere with the procurement of raw materials and crops. 

Predicting and avoiding extreme weather disruption is a major priority for sourcing teams in 2024. Widespread nearshoring efforts in Europe and North America are seeking to increase procurement resilience by shifting supplier ecosystems closer to home. However, much like the process of friend-shoring to avoid geopolitical tensions, this is not an overnight process. Experts believe it could take between two and three years before moving supply chains closer to home starts to positively shore up procurement resilience. By then, who knows what kind of climate we will be dealing with. 

3. Poor quality data 

Procurement is an increasingly data-driven field. Increasingly complex supply chains, growing risk of disruption, and greater expectations on procurement teams to be strategic value creators are all intensifying the demand for data. 

“Capturing, protecting and then leveraging an organisation’s data through the use of AI and Machine Learning is an example of how organisations are increasingly turning towards intangible assets to extract new sources of value,” noted Ken Chadwick, VP Analyst at Gartner’s Supply Chain Practice, in a report from October.

However, many procurement teams struggle to organise and utilise the massive amounts of data they collect. The massive deluge of data gathered by thousands of IoT sensors, smart platforms, and analytics tools is giving rise to data silos within organisations and poor quality data as a result. Procurement teams must abandon the “more is more” approach to data analytics. Instead, they must prioritise quality over quantity, and successfully tackle their data complexity issues in order to successfully make smarter, more informed decisions. 

4. Skill shortages 

Labour and skill shortages are hitting every industry. While much of the conversation is focused on the crisis-level disruption caused by a deficit in warehouse and trucking workers for the logistics sector, procurement is feeling the pinch as well. According to a recent Gartner survey, fewer than a fifth of procurement directors and executives believe that their teams contain “adequate talent” to meet the future needs of their organisations’ procurement functions. 

Shifting talent requirements driven by the increasingly digitalised and strategic nature of procurement are adding to the problem. Just 4% of procurement leaders told Gartner that no gap existed between their current capabilities and their need for technology and data skills.

5. Maverick spending 

If unauthorised spending is unregulated throughout the procurement function, it can throw off budget forecasts. These disruptions are difficult to manage for procurement as they typically originate outside the function itself, typically originating from employees or departments operating beyond procurement’s jurisdiction. This maverick spending, or “dark procurement” is difficult to track and even more complex to reign in. 

Creating standardised procurement processes across the organisation is a vital first step. Procurement leaders should enforce  strict purchasing guidelines and approval systems. It’s also important to prioritise working with trusted people and companies, both within the organisation and in the supplier ecosystem to avoid corruption.

However, eliminating maverick spend is less an issue of regulation and more deeply rooted in an organisation’s broader culture. Using training, effective communication, and collaboration with other elements of the business, procurement can cultivate good purchasing behaviours within other departments that eliminate maverick spend without turning the whole procurement department into a watchdog. 

The worldwide shipping sector suffered a cataclysmic shock in 2020 with the advent of the COVID-19 pandemic. Container prices surged, delays spiralled from days to weeks to months, and the highly distributed global model of just-in-time delivery came grinding to a halt. 

Now, almost four years later, the freight industry is starting to show signs of clawing its way back. Surging oil prices from the war in Ukraine, a looming recession, and the after effects of a US-China trade war all slowed recovery. Slowly but surely, however, global supply chains have recovered, pivoted, and restructured to thrive again. 

Back to square one: supply chain disruptions are the new normal

We’re only a few months into the new year, and new pain points already threaten to push global supply chains backwards into situations that feel an awful lot like mid-2020. 

On top of economic uncertainty, disruptions to global shipping lanes sent shockwaves through supply chains at the start of 2024. 

Two of the world’s busiest waterways are both experiencing serious disruptions, with both the Panama and Suez Canals handling less traffic. 

$4 million for a fast pass through the Panama Canal 

In Panama, a once-in-a-generation drought brought water levels at critical points along the waterway to half its usual level. As a result, cargo traffic dropped from an average of 36 to 38 ships per day in the past to approximately 18 in February. Lower water levels also mean ships cannot pass through the canal as heavily loaded as before. 

Paul Snell, chief executive officer of British American Shipping, told Fortune in December that “We face less capacity, more trips, higher costs and a less efficient supply chain.” Reports indicate that, at the end of 2023, some tanker captains were paying up to $4 million to jump the queue to pass through the canal. Others risked the weeks-long, dangerous voyage round either the Horn of Africa, or the southernmost tip of South America to reach their destinations. 

Troubled waters in the Red Sea 

Over 22,000 ships passed through the Suez canal in 2022. This year, that number is expected to be much lower. 

The Houthis, acting in response to Israel’s genocidal assault on Gaza, hijacked a series of Israeli-owned cargo ships in the Red Sea. While the attacks were carried out without loss of life, they provoked a sizable response from the US and UK armed forces, and disrupted trade through the world’s busiest waterway.  

Global slowdown triggers price increase 

The effect of water shortages in Panama and conflict in the Suez have been profound. A United Nations report found that traffic is down by more than 40% in both the Suez and Panama canals compared to their peak operating rates.

The result of less traffic, ships travelling longer distances, and increased risk of disruption is a severe rise in the price of container freight. 

In Q4, the worldwide cost to ship a 40-foot container nearly doubled compared with November of 2023. The US’ nine largest ports experienced a 13% decline in the total number of twenty-foot equivalent units handled compared to the previous year, and C.H. Robinson, the country’s largest freight broker, reported that fourth-quarter revenue and earnings fell 17% and 68%, respectively year-on-year. 

The report advises that organisations “importing from or exporting to South America, the Far East or the Middle East via either [the Suez or Panama canal] should plan for the incremental cost and time requirements to use alternative shipping routes and modes.” 

Even if the disruptions in the Suez and Panama are resolved, the first half of 2024 will be defined by higher shipping prices and increased disruption. The UNCTAD’s report confirms that “Container freight rates on Asia–Pacific to Europe routes have risen sharply since November 2023,” with weekly rate spikes for single containers of $500 observed in the last week of December 2023. “Average container shipping spot rates from Shanghai in early February 2024 more than doubled – up by 122% compared to early December 2023. The rates from Shanghai to Europe more than tripled, jumping by 256%.”