Western and Central Europe's contribution to global supply chain risk fell in Q2 2017 to 29.94 percent, compared with 30.14 percent in Q1, according to the CIPS Risk Index, powered by Dun & Bradstreet.
The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains.
The main driver of this fall in risk is France, following Emmanuel Macron's victory in the French presidential elections. Macron's victory brings greater clarity, following fears that Macron's main opponent, Marine Le Pen, would withdraw France from international trade agreements and the EU, and immediately suspend France's membership of Europe's Schengen border-free zone.
The new EU trade deal with Japan is also good news for supply chain risk, with trade tariffs due to be removed for key sectors including automotive and agriculture. This new deal comes after the US withdrew from the Trans-Pacific Partnership, leaving room for the EU to fill the gap.
However, the outcome of elections in Italy and Austria are unclear, and if parties that are unsupportive of the EU and keen to leave the single market rise to power, this could lead to supply chain disruption if more countries leave the single market. Italy's elections are due to be held in 2018, and the Eurosceptic Five Star party, which has previously promised to pull Italy out of the Euro, has been gaining support.
Positive developments in Western and Central Europe put downward pressure on global supply chain risk, but were also counteracted slightly by an increase in risk in the Middle East and North Africa. The increase is largely due to the severing of diplomatic and trade ties between Qatar and each of Saudi Arabia, Bahrain, Egypt and UAE. These events are having a significant impact on Qatar, limiting the flow of goods to and from the country and forcing it to re-route supply chains through Oman. As a result, the Middle East and North Africa contributed 6.91 percent to global supply chain risk in Q2 2017, up from 6.87 percent in Q1.
Additionally, large-scale protests took place in Romania following the government's decision to amend the Penal Code of Romania to weaken anti-corruption laws. This led to a rise in Eastern Europe and Central Asia's contribution to global supply chain risk to 7.58 percent in Q2 2017 from 7.55 percent the previous quarter.
Overall, global supply chain risk fell to 81.27 in Q2 2017 from 81.90 in Q1, though the underlying risk trend is on the rise.