China is exposed to significant natural threats, including earthquakes, windstorms, floods and tsunamis, and a new study from FM Global revealed there is growing concern that a natural disaster in China will have a severe impact on supply chains even more than the 2011 Japan earthquake and tsunami did.
The FM Global Supply Chain Risk Study surveyed 100 financial execs at large multinational corporations and found that:
86 percent of those polled said they are more reliant on China as a critical supplier than they are on Japan (43 percent).
The vast majority (83 percent) consider supply chain disruption a moderate to great risk.
Virtually all (99 percent) of those companies reliant on China for their supply chain are concerned about natural disaster-related disruptions.
Most (65 percent) are considering "increasing collaboration with suppliers on mitigating risk at their locations."
Supply chains in China are more likely to face business disruption by natural disaster, particularly since China has not fully embraced many of the risk management policies followed in the US and Europe. Plus, any supply chain disruptions could have wide-spread global impacts.
"The findings of the FM Global Supply Chain Risk Study should be a wake-up call for companies that have substantial investment and dependency on supply chains in China," Vinod Singhal, Brady Family Professor of Operations Management at the Georgia Institute of Technology's College of Management, said in a press release. "A natural disaster-related supply chain disruption in China would have far-reaching and long-lasting negative economic impact. It would slow down the global economy because China is not only a major exporter of goods, but also a major importer of goods. It would cause shortages in many consumer and industrial products that could lead to inflation and devastate the share price of companies."
For more information, see the complete FM Global Supply Chain Risk Study, available here.