Supply chain disruptions can't be divorced from the other risks facing us today

Supply Chains Are At Risk – But No One Threat Stands Alone

Shipping, particularly maritime transport, is often the most important part of global supply chains. At present, the most immediate danger to global shipping are cyberattacks. It comes as no surprise: AI has brought tremendous benefits, but it’s also been a gift to hackers. Already, cybercriminals were thriving – in 2024, cybercrime is estimated to have cost the world a staggering $9.5 trillion in damages, stolen money, lost productivity, and other related costs. With artificial intelligence growing daily in sophistication, cybersecurity is becoming both more difficult and more necessary for those managing supply chains.

But it isn’t the only risk. Yes – ports, cargo systems, and freight networks are prime targets for hackers. And yes, one successful breach can paralyse essential trade routes, leaving manufacturers stranded and supermarket shelves bare. But severe weather, made more serious and more likely by the climate crisis, is also squeezing supply chains from every direction; the Panama Canal’s ongoing drought has slashed shipping capacity, forcing vessels to take longer, more expensive detours. And political turmoil, about which no one needs to be told, also presents a challenge. Meanwhile, rising tensions in the Red Sea have turned a vital trade passage into a high-risk zone, forcing many ships to take the long way around Africa, adding thousands of miles to their journeys, inflating costs, and delaying deliveries.

It would be tempting to see these risks as isolated, and to tackle whatever offers the most ‘bang for your buck’. That’s an illusion, and a dangerous one. Because risks today, though apparently distinct, in fact interlock. To treat them in isolation is to play a very long game of Whack-a-Mole, dealing with a problem only for it to reemerge right away. If global warming makes certain areas unlivable, then that will drive mass migration. The integration of new communities into established ones causes political tensions and short-term economic strain. That can weaken governments and cause political crises, or create civil unrest. Cybercrime thrives: laws become harder to enforce, economic hardship pushes skilled individuals to hack, and data leaks become more likely. Supply chains, already attractive targets, become seriously vulnerable.

But global warming can also harm supply chains directly. So can mass migration, which often leads to labor shortages. Political crises can cause capital flight, which reduces investment in infrastructure; or destabilise trade agreements and economic partnerships, or prompt the weaponisation of supply chains and restrictions on the export of critical goods, like rare-earth metals. You see the problem: these risks are not so easily parsed out. The prime threat to supply chains is not this or that crisis, but a polycrisis – a situation where multiple, interconnected crises converge and amplify each other.

The sheer complexity of this risk landscape, and the extraordinary cost attached to picking up the pieces when disaster strikes, has forced insurers to evolve. Reflective, progressive insurers are moving quickly to a model centred on prediction and, in some cases, prevention – not on compensation and response. This is, in fact, a welcome shift. It’s a cliché that prevention is better than cure. But if it has taken a crisis for it to happen, then the blame can’t be laid at the feet of insurers. The technology to predict accurately simply didn’t exist in the past.

It does now. First among the tools insurers are using is the result of rapid advances in the field of Earth Observation and its associated technologies: the area that corresponds to the gathering of information about the planet using remote-sensing (mainly satellite imaging) and ground-based sensors, IoT. Sophisticated, AI-powered analytics and machine-learning solutions make sense of the raw information gathered so that insurers can inform their clients about vulnerabilities – for example, port congestion, cyber threats, severe weather events. All this can be tracked. And already the big shipping firms are leaning on this tech to optimize routes and enable rerouting. The technology gets better every day.

And that’s just as well, because the crises that together make up the polycrisis are evolving very quickly. The climate crisis is getting worse, hackers are growing in boldness and sophistication, geopolitical volatility seems to be increasing. Critics should bear this in mind as they lament the perceived high cost of preventative insurance, or the burdens associated with technological integration. Not only is that tech necessary but it is, in the medium term, cost saving: the European Investment Bank estimates that every €1 spent on prevention saves between €5 and €7 in recovery costs.

The polycrisis is real, and supply chains are the most vulnerable pressure point. By recognising the interwoven nature of today’s risks and making use of the cutting-edge technology now at our disposal, we can keep those crucial veins and arteries of the global economy health and intact, and ensure that goods continue to flow around the world.

By Pierre du Rostu, C.E.O. of AXA Digital Commercial Platform