The so-called transition to a new world order based on more poles has caused a reverse process of globalization in the field of international trade, which has led to a significant increase in risks in the supply chain. While players competing in certain sectors diversify or limit each other’s influence, it seems impossible to witness major changes in status quoin the short or medium term and perhaps even in the long term. Implications for specific commodities or affected industries (precious metals, oil and natural gas, semiconductors, wind turbines, electric vehicles, solar panels, etc.) are often analyzed, but not for the financial services industry and its participants, although this is perhaps the industry with the highest degree globalization.

As global realities and, as a result, the global economy change, the financial services industry faces a new generation of risks such as stability, cyber risk and, more recently, supply chain risk. We have given significant attention to cyber and sustainability risks, but have not done the same for supply chain risks.

The degree to which the bank understands the dynamics of the borrower’s supply chain becomes fundamental to understanding the client’s business model, its degree of sustainability in terms of international trade and, implicitly, the risk profile when assessing the borrower’s creditworthiness. Whether or not the borrower has a sustainable business model with respect to customers and suppliers, what are the consequences of the risk for the borrower in terms of its supply chain (sanctions on customers or suppliers, lack of goods for the borrower or its supply) supply chain, risk of trade restrictions at any level of its supply chain, etc.), how this risk can be quantified and monitored, how reserves and guarantees can be recorded and how credit is priced – all these aspects are becoming extremely important for banks.

In order to pragmatically analyze this new category of supply chain risk, banks could, in principle, manage a large part of this risk by customer segmentation, but this option would not exclude the process of individual knowledge of the actors that are part of the supply chain of each individual borrower.

As in the banking sector, when it comes to climate risk management, there is no universal methodology and sufficient data to allow for a full analysis, and again, as in the climate risk management situation, the solution will be data collection banks from each borrower based on its size and ability to analyze and provide information on its profile from a supply chain perspective. The first step may be to implement such an approach for a priority segment of customers, depending on such criteria as the size of the exposure and the sector of activity.

The article is signed by Dimitrios Horanitis, partner of Deloitte in Romania, head of global risk and regulation of the financial services sector and leader of the financial services sector in Central Europe