Global tensions strain weak links in tech supply chains
Technology often transcends borders. The internet is the clearest example of this: a network encircling the world, connecting billions of people for everything from business to romance. Its role in enabling remote work has been highlighted during the two years of the pandemic.
Yet, as it has become increasingly clear that the development, reach and success of technology is highly dependent on tightly linked supply chains, the very structure of these connections has become increasingly fragile. From the Russian invasion of Ukraine to national digital security concerns, geopolitics can threaten both the supply of physical components and the technology communities critical to innovation.
For business students, it becomes essential to understand that while globalization has been of great benefit to business, they should also be aware of the risks posed by international turmoil such as trade disputes and security issues – and consider ways to mitigate them.
The physical supply chains of the technology have been the subject of discussion and dispute for years, particularly centered on the Chinese technology group Huawei. In 2019, the United States blacklisted the company for security reasons and warned its allies that they should not use Huawei equipment for 5G mobile networks.
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The inability to access crucial US computer chips caused Huawei’s revenue to drop significantly last year, forcing the company to try to expand other parts of its business, including cloud services and manufacturing. components for electric cars.
But Huawei is far from the only company dependent on vulnerable international supply chains. Eric Thun, Associate Professor of Chinese Business Studies at Oxford University Said Business School, says it has become harder than ever to insulate a company from supply chain risks. “You’ve seen increasing complexity in supply chains and they’re moving much faster than before,” he says.
An increasing concentration of market share at every level of production has actually created fragmentation – one company may dominate in microchips, but depend on another company for raw materials. This, in turn, makes it difficult for governments to secure entire supply chains for complex products with dozens of parts, each made up of smaller components.
Employers should also consider that while the internet and the remote work it enables now make it possible to recruit workers from further afield, geopolitical issues can have a serious impact on their lives and on the companies that employ them.
Russia’s invasion of Ukraine highlighted this problem, given that both countries were technology hubs for companies elsewhere looking for relatively cheap but highly skilled developers and programmers. Some Ukrainian employees have fled the violence, while others are forced under government rules to stay and fight. Companies relying on Russian developers, meanwhile, may struggle to pay their bills as various banking and payment services have been suspended.
“What’s really interesting is that almost every fintech company has been affected,” says Itamar Lesuisse, co-founder and CEO of crypto firm Argent. “It’s personal for a lot of people,” he continues, noting that Ukraine has been a hub for cryptocurrency project developers and engineers.
It also creates a considerable moral imperative for companies to actively engage with local partners. “Many companies are considering moving teams to Lviv [in the west of Ukraine]and help those who can leave get out,” Bruce Macfarlane, co-founder and managing partner of MMC Ventures, told the FT in March.
Some companies have supported staff who are at risk. For example, Revolut, the digital-only bank, offered relocation assistance for Ukrainian employees in the country or abroad in February.
But the situation does not end with temporary assistance for Ukrainian workers, Macfarlane stressed. In the longer term, companies will have to deal with the problem of employees who wish to return to their country of origin.
At a time when ESG (environmental, social and governance) concerns are at the forefront, business leaders and students need to think carefully about the ethical aspects of supply chains. The benefits of globalization and an increasingly remote workforce in sectors such as technology must be weighed against the challenges and need for employee security.
Business geopolitics is difficult to navigate, especially when the situation on the ground can change so quickly. The Russian invasion of Ukraine transformed supply chains in a month, forcing companies to make quick policy decisions. For those working both upstream and downstream, the impact can be felt quickly and without warning.
These challenges make it essential that business school education addresses these issues. If tomorrow’s leaders only consider these concerns when faced with a crisis, it may be too late.