Pandemic and War Force Rethink Business Models

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As FT columnist Rana Foroohar writes today, the war in Ukraine has not only upended countless lives, but is also upsetting business models, further damaging supply chains already weakened by the pandemic.

The situation is unprecedented. “The ongoing supply chain disruptions have now lasted longer than the oil embargoes of 1973-4 and 1979 – combined,” says Richard Bernstein of investment firm RBA.

Even companies that do little business in the region recognize the importance of more regional or local production hubs, writes Foroohar, which has long been recognized by “manufacturing” companies that source locally, but which is now picked up by bigger brands who want more insurance against everything. type of shock, whether political or climatic.

Many large companies are turning to vertical integration to mitigate disruptions such as those caused by the global semiconductor crisis. Intel announced last week that it would invest 33 billion euros in manufacturing and research in Europe, to reach 80 billion euros by the end of the decade, as well as 40 billion dollars to develop manufacturing. chips in the United States. The United States and Europe are also planning tens of billions of dollars in industry support to try to reduce reliance on Asian manufacturers.

Food production is another sector forced to rethink. The EU was already revising its sustainable food strategy as part of a drive to eliminate carbon emissions, but now faces falling grain and fertilizer exports from Russia and Ukraine, which raises food safety concerns.

Energy, too, is in the midst of a transformation, as the West, and Europe in particular, rush to find alternatives to Russian oil. Germany said yesterday it had reached a long-term deal with Qatar for the supply of liquefied natural gas, a deal described by a minister as a “door opener” for the German economy, while in UK, Shell has submitted revised plans for a North Sea Gas Field initially rejected by the country’s regulator.

In addition to reshaping traditional business practices, the conflict has also spurred nascent sectors such as cryptocurrency systems, enthusiastically embraced by the Ukrainian government as a quick way to collect donations and pay for military hardware.

Another beneficiary of disrupted supply chains cited by Foroohar is 3D printing, which has gained traction during the pandemic to locally manufacture everything from PPE to emergency housing.

“Even in times of war, decoupling and geopolitical fear, it should be remembered that there are opportunities in crisis,” she concludes.

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Need to know: the economy

UK Chancellor Rishi Sunak is urged to tackle the cost-of-living crisis in its spring statement, but chief economics commentator Martin Wolf says it must also explore options for lasting reform. We’ll have all the details in the next Road to Recovery, but in the meantime, here are five things to watch for in Wednesday’s keynote.

Saudi Arabia said he would not be held responsible for shortages in the global energy market as he warned of disruption caused by missile attacks on oil facilities by Iran-backed Houthi rebels in Yemen.

The former head of the Ukrainian State Energy Company Naftogaz called in the FT for an immediate embargo on Russian liquefied natural gas and petroleum products. Read our explainer on whether Europe can wean itself off dependence on Russian fossil fuels. And if you have school-aged children, refer them to our new set of resources for students on climate change.

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Karen Betts, chief executive of the Food and Drink Federation, has warned that UK consumers will face shortages and higher bills due to the Ukraine crisis unless the government steps in to help the industry. Suggestions include allowing the use of alternative products and relaxing regulations. Fertilizer prices broke a new record today.

Line chart of CRU Fertilizer Price Index (January 2006 = 100) showing fertilizer prices hit new highs

Latest World

The Ukrainian crisis has led food shortages in Arab countries as wheat prices soar. Grains and vegetable oil from Ukraine and Russia are essential to national diets in the region and the UN has warned that the situation “could lead to an escalation of hunger and poverty with disastrous consequences for stability world”. Egypt today devalued its currency and raised interest rates in an attempt to contain the impact of the war.

Companies in hong kong welcomed the easing of some quarantine and flight restrictions, especially from the United States and the United Kingdom. “The measures are the sign we’ve all been waiting for,” said the president of the European Chamber of Commerce, but added: “The decision comes at an almost too late stage… We have to see the recovery plan to avoid d other damage, because the damage has already occurred for a long time. Mainland China still grapples with the problem of mass infections and millions of unvaccinated seniors.

influential investor Gross invoice told the FT that the Federal Reserve’s rate hike plan would “break the US economy“.

Need to know: business

Great Aero Flightis how one observer described Moscow’s decision to allow foreign planes to re-register in Russia, thwarting efforts by global leasing groups to recover more than 500 planes, worth an estimated $10 billion. of dollars, which were blocked in the country.

Great corporate statements on leave Russia are easy to do but complicated to achieve. FT journalists look at the key issues facing multinationals. Nestle was forced to defend his decision to stay in Russia as Ukraine’s president increased pressure on the world’s biggest food company to step down, citing the incongruity of its “good food, good life” slogan.

The last of our Graphics that matter The series shows the level of fear in the markets, as measured by the Cboe Vix index, beginning to return to normal after wild swings caused by the invasion of Ukraine and before the Reserve’s first rate hike Federal since 2018.

Line chart of Vix futures value over time showing investors becoming less concerned about short-term jerks

Great Britain hospitality and Hobbies Sectors are particularly at risk from soaring energy prices, with energy-intensive gyms and leisure centers with swimming pools “at major risk of closure”. The next few weeks are critical as a large number of bespoke contracts signed with energy suppliers expire in April, in line with the end of the UK financial year.

From selling bottleless beverages to niche food start-ups, start-ups have been actively responding to the pandemic-induced shift in the way people work, live, shop and communicate. Find out more in our annual survey of Europe’s 1,000 fastest growing companies.

About 90% of all goods traded in the world are transported by sea but the costs to the climate are enormous, amounting to a billion tonnes of greenhouse gases released into the atmosphere every year. Is there a viable alternative? Watch our new video on the cost of greener shipping.

Video: The Cost of Greener Shipping | FT rethink

The world of work

Along with the great resignation of the pandemic came the great retirement as many older workers said goodbye to the office. We could, however, be set for the Big comeback, says the FT Lex column, as falling stock markets and rising costs of living force retirees to return. Coming back can also be a bit more enticing now that sociable office life can be mixed with working from home.

Many of those leaving by burnout or for other reasons could be prevented from heading for the exit in the first place if companies spent more time giving them reasons to stay, writes Emma Jacobs.

Could sun, sea and sand do the trick? One of our most read stories last week was about Citigroup’s new hub for junior bankers in the Spanish city of Malaga, offering a markedly different approach work-life balance. Executive editor Andrew Hill said the proposal would require careful management: “Beachside burnout is still burnout”.

PureGym boss Humphrey Cobbold tells the FT how he has remained confident in his business model despite failed IPOs and forced shutdowns during the pandemic, in our latest how to lead maintenance.

Covid cases and vaccinations

Total number of global cases: 459.5mn

Total doses administered: 11.0 billion

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And finally…

From psychoanalyst Susie Orbach on the need to conscientiously accomplish and manage the twists and turns of life, to the truth about fasting. Peruse FT Magazine’s State of Mind special.

© Ana Yael

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