External Shocks: 56% of Business Leaders Fear Severe Disruptions
A KPMG report reveals 56% of global business leaders expect external shocks like AI and geopolitical conflict to disrupt operations over 5 years.
The global corporate landscape is bracing for a storm. According to a recent report by KPMG International, 56 per cent of business leaders worldwide anticipate that external shocks will severely disrupt their organisations' performance, operational costs, and overall operations over the next three to five years.
The report paints a picture of a volatile future where geopolitical conflicts, energy shocks, cyber threats, trade uncertainties, and climate-related events are no longer distant possibilities but imminent threats. The interconnected nature of modern supply chains means that a single disruption can ripple through multiple stages of operation, creating a domino effect that is increasingly difficult to manage.
Rising Risk Exposure and Top Concerns
The sense of vulnerability is growing. A staggering 70 per cent of business leaders admitted that their organisations' risk exposure has increased over the last two years. When asked to identify the most pressing concerns for the immediate two-year horizon, the results highlighted a shift toward technological and political instability:
- Technology and AI Disruption: The top concern, cited by 64 per cent of respondents.
- Geopolitical Conflict: A major worry for 58 per cent of leaders.
- Macroeconomic Uncertainty: Identified as a key risk by 48 per cent.
KPMG emphasizes that these risks rarely occur in a vacuum. Instead, they often reinforce one another; for instance, geopolitical tensions can lead to resource scarcity, which may then trigger cyberattacks or further technological disruptions, resulting in cascading failures across global supply chains.
The Weakest Links in the Chain
The report identifies specific areas where businesses are most exposed. Technology and digital dependencies emerged as the most vulnerable stage of the supply chain, flagged by 46 per cent of respondents. This is followed by delivered costs and price volatility at 39 per cent, and shipping and logistics at 33 per cent.
Particular attention was drawn to critical shipping routes. Tensions in the Middle East and the Strait of Hormuz are cited as examples of how maritime disruptions can bleed into other sectors, affecting insurance, financing, freight, and industrial production. KPMG warned that even companies with suppliers in different countries might still be at risk if those suppliers rely on the same maritime infrastructure.
Strategies for Survival: The Shift to Resilience
To combat these threats, companies are moving away from traditional risk management and embracing more proactive, tech-driven strategies. The report notes several key priorities for business leaders:
- AI and Predictive Analytics: 49 per cent of respondents are prioritizing these tools to enhance supply-chain resilience.
- Scenario Planning: 44 per cent are focusing on stress testing and scenario modelling.
- Alternative Sourcing: 39 per cent are seeking diverse sourcing strategies to reduce dependency on single points of failure.
"Resilience is no longer just a supply chain function, it has become a board-level imperative shaped by energy-linked disruption and a broader set of interconnected risks," said Anish De, Global Head of Energy, Natural Resources and Chemicals at KPMG International.
The overarching conclusion of the report is that the era of static risk management is over. For businesses to protect their critical operations, they must transition toward continuous risk monitoring and greater operational flexibility to navigate an increasingly unpredictable global environment.