Hurricanes and Elections | Weeks of 6 - 13 Oct '24
Risk concerns this week: US Election too tight to call. Hurricane Milton worst since Katrina. EU tax on China EVs.
Hello 👋 get a brew on because these are the top 3 emerging risks between October 6th, and October 13th, 2024…
Financial | According to fivethirtyeight.com, Trump's Republican party is favoured 544 seats of the House, against Harris' 456 in its data simulation. But the Indepedent says Harris has a +2.6 point lead over Trump (at time of writing).
The uncertainty in which way the elections will sway is cause for concern for the global economy. One recent example is Congress's decision to cut funding for Ukraine as part of efforts to prevent another U.S. government shutdown. Such decisions highlight growing internal political divisions, which could affect international relations and the U.S.'s role in global affairs. Then there’s Trump desire to impose Tariffs on imports."Electoral uncertainty, threats to democracy, and the potential for instability and chaos are notably apparent as the country faces an enormously consequential election this fall", says BSR.
You and your business face risks during U.S. election seasons, like policy shifts and market volatility. To mitigate these, you should be proactive by enhancing scenario planning and stress-testing for political outcomes. Engaging with stakeholders and investing in sustainable practices are key for resilience. Staying informed on regulatory changes and collaborating on policy advocacy can help create a stable environment supporting long-term sustainability goals.
Environmental | The world watched in anticipation on Wednesday night as Hurricane Milton's impacts were to be realised as the weather system made landfall in Florida.
The National Hurricane Center predicted it would be “one of the most destructive hurricanes on record for west-central Florida”. 23 people are said to have died, and the full damages are yet to be known. Milton isn't the only Hurricane being monitored. Mid-week, Colorado State University was tracking three additional systems from south-west of Bermuda to the coast of Africa. According to the same report, "given all the tropical activity in recent weeks, Accumulated Cyclone Energy (ACE) — a measure of the energy generated by all of the named storms — is now above average for the whole season."
This should be a stark reminder that natural disasters (likely influenced by climate change acceleration) may continue to become more problematic. Despite an increase in 'back-to-office' policies from some businesses and governments, a work-from-home strategy should still be a valuable strategy.Live updates on the Hurricane can be observed here.
Operational | The European Union has decided to impose tariffs on electric vehicles imported from China, a move aimed at addressing concerns over market distortions due to alleged state subsidies. This decision could trigger significant ripple effects across the global economy, potentially leading to trade tensions between the EU and China. Business leaders must consider the implications such tariffs could have on supply chains, cost structures, and competitive dynamics within the automotive industry.
From a risk management perspective, this is a good reminder for companies to evaluate their dependency on Chinese imports and explore diversification strategies or alternative sourcing to mitigate potential disruptions. If you don’t have these connections to China, then ask research whether your third/fourth party suppliers do? Or, is a disruption to supply chain worth considering?
Our thoughts
It’s all about elections, weather, and tech this week. Elon Musk has been busy showing his support for Trump while releasing his fully autonomous taxi on the same night he released the Terminator, or as he calls it Optimus.
OpenAI’s finance documentation has been circulating as they seek another round of funding. According to the papers and analysis by finance professionals, the company is losing money. The papers show a loss of $5 billion against the $3.7b they’re hoping to turnover in FY24. It makes you wonder when investors will want to see bigger returns.
Then there is the threat of increasing cyber risks. Next week, we will report on a Chinese government backed hacker group called Salt Typhoon. This expert group of cyber criminals have breached the US’s top internet providers and potentially have been sitting patiently for months collecting highly classified information from Police, CIA, and Government channels. And they still don’t know how to shut them out.
All of this reminds one to have a reset and consider a long-tail risk management framework that evolves as the threats do.
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Harris only +2.6 points up
Category: Economic
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In summary: The ongoing political landscape in the United States is prompting much risk, particularly when one focuses on the polling dynamics between Vice President Kamala Harris and former President Donald Trump as they gear up for potential 2024 presidential campaigns. The Independent highlights how current voter sentiments are shaped by various socio-political factors, including civil unrest and economic concerns. But the race to the Oval Office remains too close to call.
As the political climate intensifies, geopolitical implications emerge, particularly around civil disturbance should the election results be close.
However, we’re specifically focused on the risks to supply chain, trade agreements, and foreign commercial relationships that may impact both operational and financial elements of organisations around the world. In 2024 alone, we will see 70+ elections take place making it a dynamic and complicated year for foreign partnerships. If re-elected, Trump says he will impose a 10–20 percent across-the-board tariff on imports into the United States, as well as an additional 60 percent tariff on all imports from China. Whether this happens or not, businesses can - and should - prepare for tensions and loss of critical supply now.
Sources:
Navigating US Election Uncertainty: A Call to Action for Sustainable Business | BSR
Can Kamala Harris beat Donald Trump? Latest poll updates | Independent
You should be concerned if…
If you are reliant on trade agreements between your area of operations and the US, the election outcome may have impacts on this.
This could particularly impact energy, manufacturing, and technology.
These items and suggestions are generic assumptions. We recommend considering your own unique threat landscape against your critical dependencies. If you don’t know what these are, get in touch and we can help discover them with you.
Type of Risk
Supplier / 3rd Party Negligence
Operational Delays, Safety Concerns, Financial Impact
Preventative actions
Diversification of Supply Chain
Multi-Source Strategy & reshoring: Businesses can reduce reliance on single suppliers or regions by developing relationships with multiple suppliers across different geographical locations. This may also include the strategy to nearshore or reshore. Companies in the U.S. and Europe have already begun reshoring or nearshoring certain operations to avoid disruptions from volatile regions. Specifically, the ASEAN regions are seeing a boom in US companies opening up factories and operations.
Strategic Stockpiling and Inventory Management
Building Buffer Inventories: Increasing stock levels of critical components and raw materials can help companies manage short-term disruptions. However, this must be balanced with the cost of carrying excess inventory against demand forecasting. Use of reliable data analytics can help anticipate potential disruptions and allow companies to adjust their inventories and production plans accordingly.
Enhanced Risk Monitoring and Supply Chain Visibility
Supply Chain Mapping: Companies need to map their entire supply chain to understand vulnerabilities. This can help identify critical nodes and potential bottlenecks, allowing them to react more swiftly to disruptions. There are over 70 nations also conducting an election in 2024, meaning other supply chains are at risk of major disruptions. So, investing in real-time supply chain monitoring systems can allow you to track the flow of goods and materials globally, providing early warnings of potential disruptions due to geopolitical events.
Investment in Technology and Automation
Digitalization: Leveraging advanced technologies like AI, blockchain, and IoT can improve supply chain transparency, optimize logistics, and identify weak links before they become problems. However, the more technology implemented, creates more cyber risk. Ports and freight in particular are an easy target and vulnerable to major breaches.
Strengthening Trade Alliances and Policy Advocacy
Collaborating with Governments: Companies should engage with governments and trade bodies to ensure access to critical resources during supply chain disruptions. Public-private partnerships can also help streamline logistics and access to essential commodities. While making these connections, advocating for stable and transparent trade agreements can reduce barriers to international trade, ensuring smoother flow of goods and resources even in times of political tensions.
Developing Resilient Supply Chain Models
Flexible Manufacturing: Implementing flexible manufacturing processes that can be quickly adapted to produce alternative products or switch between suppliers can provide resilience in times of disruptions. Organisations should consider Geopolitical Scenario Planning. Regular engagement in scenario planning and stress-testing for potential geopolitical risks is valuable. This allows for quicker adaptation and response when disruptions arise.
Sustainability and Local Sourcing
Circular Economy and Local Sourcing: Investing in sustainable practices, such as recycling materials and sourcing locally, reduces reliance on global supply chains and minimizes the impact of geopolitical instability.
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