Buyers should prepare for eurozone break-up

7 December 2011

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7 December 2011 | Angeline Albert

European companies need to refine their contingency planning for the extra political risk that may result from any break-up of the eurozone.

The warning comes in the annual summary of potential risks in the year ahead, published by consultancy Control Risks.

The Risk Map said companies may need to plan ahead and move supply chain investment, away from “the more vulnerable eurozone economies”. The document added businesses may need to apply stricter payment requirements, particularly for government buyers in Greece, Italy, Portugal and Spain.

“Business will still bank on the eurozone muddling through but Europe faces a bumpy ride in 2012 and it is possible that the wheels will fall off,” the report said. “Plans will be progressively laid out, but there is no guarantee that markets will stick to the script.”

In general, Western European business was described as facing greater political risk in 2012 than at any time since the break up of the Soviet Union 20 years ago. The backlash by citizens in the region against public sector cuts and the imposition of new taxes is expected to help extremist parties pick up electoral votes. Bouts of unrest of the type witnessed in London, Athens and Madrid this year are also described as likely to reoccur in Europe in 2012. Cyber protests were also highlighted as posing reputational and operational threats to companies.

Piracy around the Horn of Africa will continue to pose a major threat to supply chains in 2012. This worsened in 2011 and is described by the report as a major threat to shipping in the year ahead. It said more robust protective measures taken by merchant vessels have reduced the number of hijacks, but pirates continue to adapt to threaten the transportation of goods.

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