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What could the North Korea crisis mean for your business?

Since the Christchurch events of 2010/11, we’ve become accustomed to thinking about business continuity events in terms of earthquakes, and maybe some flooding.

But how would your business cope in the event of a conflict?

It sounds dramatic, but North Korea’s threat of an atmospheric nuclear test in the Pacific and ongoing threats to Japan and the USA makes the prospect look plausible. Of course, it seems pretty unlikely that New Zealand would be directly involved in a war in Northeast Asia, but tensions are increasing – and if fighting broke out, that could potentially involve the use of nuclear weapons in warfare for the first time since 1945.

What would that do to supply chains?

Well, it would depend on the scale of any conflagration. But even a conventional invasion of South Korea by the North would be highly destructive, leading to a significant and tragic loss of life. Even if they were eventually driven back, the devastation of war would likely destroy South Korea’s export businesses, at least in the short-term, with big impacts on our ability to access well-known brands of consumer appliances, cellphones, computers and cars.

And what if, in fit of pique, the North Koreans decided to do the unthinkable and hurl an H-bomb at Tokyo, or if the Americans responded in kind?

The results would be catastrophic, and lead to total chaos in Japan as well, a country from which we buy cars, computers and machinery.

A significant proportion of consumer goods sold in New Zealand come from China. Shanghai is only 600 kilometres from South Korea, roughly the distance from Wellington to Whangarei. It’s really pretty close – and it’s conceivable that any war could have significant impact on shipping routes in the Sea of Japan, Yellow Sea and East China Sea. Air routes, especially to Beijing, Tokyo and Seoul could also be heavily disrupted.

There’s no need to start stockpiling goods for your store.

But, it is worth thinking about whether you have diverse supply chains, and what would happen to your business in the event that there was massive disruption to trade in Northeast Asia. How long would you have stock for? And what are your alternatives? Even if you are buying from a wholesaler, from where does that firm get its stock?

It’s a good idea too to think about your customer base. 

Are Asian tourists a big part of it? If a significant proportion of your customers are from China, South Korea or Japan, what happens in the event that tourists from those markets are suddenly unable to travel?

Most retailers will not have insurance policies that cover this kind of business interruption – but, as with any business continuity planning, it is a good idea to reflect on these questions. Nobody wants to see a war in Korea, but it’s worth asking yourself – if something does go awry up there, how will it impact your shop?

This story originally appeared on Retail NZ’s blog.

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