Companies better prepared than ever for global disruption

European firms are experiencing the effects of Middle East tensions in most sectors. Alexander Ziehe, chairman of the German Business Association, talked to VIR's Bich Thuy about how member companies are adapting to the headwinds.

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How are escalating geopolitical tensions in the Middle East affecting the association’s member companies operating globally and in Vietnam?

Our members can already feel the effects of the Middle East tensions in most of the sectors are global supply chains and energy supply are affected by disruptions. It is a true shockwave for the global economy, but will have different impacts based on the industry and the national resilience.

On the sea freight side, most shipping lines had already rerouted their Europe cargo lines via the longer Africa route. Nevertheless, many ports have increased congestion as Middle Eastern bound ships are stuck, which is increasing port handling times and delaying cargo handling.

Air freight, on the other hand, is a true challenge for our members as many major airlines in the Middle East cannot yet fully reinstate cargo flight routes. The lack of capacity cannot be covered by other airlines, and therefore some air freight route prices are now up by 70 per cent. This impacts in particular fast-moving goods and short notice deliveries, and can be critical for companies and users, like in case of rare pharma products. For companies operating in Vietnam, many of which are deeply integrated into global manufacturing and export supply chains, the current situation means longer transit times, higher logistics costs, and greater uncertainty in planning. In case of dependencies to the Middle East, it also can lead into major disruptions.