Geopolitical instability and regulatory uncertainty emerged as the biggest among five major threats facing the transportation industry, according to results of a survey done among transport executives.
The geopolitical megatrend is the highest rated category of risk, highlighting the impact of world events on operations and, ultimately, corporate profitability, according to the 2016 Transportation Risk Index recently released by global advisory, broking, and solutions company Willis Towers Watson.
“Terrorism, war, sanctions, protectionism, and fluctuating political allegiances and commercial alliances add risks,” said the index. But the regulatory actions of government, regulators, and the judiciary—often taken in response to those events—can prove just as disruptive, it added.
The research measured the industry’s current risk environment as rated by 350 senior executives from the air, land, and sea sectors, revealing the key risks that will shape the industry over the next 10 years.
Another risk megatrend is digital vulnerability and rapid technological advancement. The single biggest individual threat across all modes of transport is the potential for cyber and data privacy breaches. This as the skills sets of the digital threat actors are growing, and the transportation industry’s increased reliance on third parties is multiplying the potential points of entry.
The third is changing market dynamics and business model insecurity. The pressure is rising on transport executives to build more dynamic business models that can respond to an increasingly volatile global marketplace.
Traditional disruptors such as fluctuating commodity prices and interest rates, the availability of competitive capital, emerging markets, and fickle consumer demands are being joined by state-sponsored and non-traditional competitors, adding to industry insecurity about current business models.
Complex operating models in an interconnected world is the fourth top threat. Global supply chains—both physical and digital—are interdependent by nature, exposing companies to the cascading consequences of risk.
“The never-ending search for growth often drives transport companies into volatile new markets and uneasy partnerships that expose even the most resilient firms to the vulnerability of third parties,” said the paper.
Finally, dangers also stem from talent management and the complexities of a global workforce. The report noted that with the retirement of the Baby Boomer generation, companies across all modes of transport are facing skills shortages.
“With each sector being transformed by advances in technology, the focus of management is shifting away from finding enough people towards finding the right skillsets and building a workplace environment that will retain their most important people in an increasingly competitive marketplace,” it said.
“The transportation world is rapidly evolving, so risk strategies need to be responsive and dynamic,” said Mark Hue Williams, head of transportation industry for Willis Towers Watson.
“Regulation and technological advances are demanding new operating models while simultaneously, hostile actors are mounting attacks to take advantage of the industry’s strategic role in the global economy. All of this is set against unstable geopolitical and economic backdrops and growing demand for new skills in the workplace. Knowing how these shifting forces should shape your risk strategy is critically important, and a great opportunity for those who lead the response.”
Photo: Jawad Zakariya
