Keep an Eye on These Risks in 2024

RANE, a risk intelligence company, monitors several risks around the world pertaining to safety and security as well as cyber, geopolitical, and legal, regulatory, and compliance issues. Some of these risks could impact engineering projects and decisions in 2024.

Design News asked Matthew Bey, senior global analyst for RANE, about the current supply chain risks that could be faced this year. (Bey also helped us out last year.) Around this time each year, RANE shares the key global trends and constraints that could impact the year ahead. 

What risks are there to engineering material supply chains around the world, and what is driving these risks? Are there any particular materials of concern that could be difficult for engineers to procure?

Bey: The two most significant risks for engineering material supply chains in 2024 are likely to be shipping delays and challenges and increased restrictions—primarily by China—on raw materials. Heading into 2024 there are two significant physical supply chain challenges in the global shipping industry. The first is a drought in Central America that has led to low waters in the Panama Canal, forcing authorities to reduce transit significantly to conserve water. These restrictions have caused delays, particularly for dry bulk shipments (such as iron ore, coal, etc.), as ships have longer wait times or are using longer transit routes. The second has been the Houthi militant group’s attacks on shipping in the Red Sea, which has led most container shipping companies to shift to using the longer route around Africa to reach Europe and North America. Finally, next year we could also see labor issues in the United States affecting Gulf and East Coast ports as the International Longshoremen’s Association at the end of September could seek significant concessions from port operators, given the success that unions have had in 2023. 

Related:Why Are Manufacturers So Prone to Cyber Attacks?

China (as well as other countries) has significantly increased export controls on raw materials amid growing economic nationalism and strategic competition. Already China has restricted gallium, graphite, and germanium exports and could widen the net to include rare earths and other materials where China is dominant in next year. Moreover, China has also placed restrictions on technology used for rare earth processing, which could disrupt companies plans to produce rare earth products outside of China, like magnets. Challenges in securing these goods caught in the middle of geopolitics are likely to only increase in 2024.  

Related:Manufacturing 2023/2024: Worker Shortages and Unfocused AI

Do concerns about climate change and/or any pending regulations present any risks to the engineering and manufacturing communities? 

Bey: In 2024 the biggest focus on climate change will be many countries rewriting their nationally determined contributions by the end of the year under the Paris Agreement. Following the so-called Global Stocktake at COP28, which found that global countries were far from hitting their goals under the agreement, climate negotiators agreed to revise NDCs one year earlier than anticipated. As such we are likely to see more plans announced by governments in 2024. However, despite this it is also worth noting that the United States’s polarized political environment will lead to even more anti-ESG—including energy transition targets—policies by Republicans, particularly at the state level where Republicans currently have more power. 

What threats do original equipment manufacturers face around the world?

Bey: In addition to supply chain challenges, OEMs will continue to see an increase in supply chain requirements and export controls stemming from Sino-American competition next year. The Biden administration is, for example, considering new tariffs on Chinese EVs, battery technology, and other green technology in addition to new tariffs on non-strategic goods. As both the Republicans and Democrats are trying to demonstrate they are tough on China, the White House may finally move forward with long-delayed plans on certain issues, like changes to tariffs in an effort to show that it is taking a strong stance on China. 

Related:Could These Risks Derail Your 2023 Engineering Projects?

Does the rise of Industry 4.0, automation, robotics, and artificial intelligence pose any risks to engineering and manufacturing communities?

Bey: The rise of AI and automation creates new challenges for companies from a cybersecurity and regulatory perspective. The rise of ChatGPT in particular will lead to a raft of new proposed regulations, including the EU AI Act, in 2024 that will affect AI systems well beyond just generative AI. Generative AI’s emergence will accelerate regulations on other AI systems. This means for 2024, engineering and manufacturing teams need to closely watch regulatory and compliance developments. 

Do inflation and rising interest rates pose any risks to the engineering and manufacturing communities?

Bey: In 2024 interest rates are likely to start coming down significantly as inflation slows and gets closer to central bank targets. While this will help engineering and manufacturing companies borrow to increase investment and ease inflation on domestic costs (and for their sales), it could lead to a weaker dollar, particularly to the yen. A weak dollar will support U.S. manufacturing exports but will reduce purchasing power for imported materials, components, and equipment. 

Are there any other risks impacting the engineering and manufacturing communities?

Bey: This year is essentially a year of global elections, with a number of critical countries scheduled or likely to hold elections. While the big focus will be on the United States election for obvious reasons, the European Union, United Kingdom, South Africa, Indonesia, India, and Mexico are all holding elections as well. Each present their own unique risks that could affect regulatory policy as well as in some countries supply chain risks, such in South Africa where the ruling African National Congress may be forced to rule as a minority government for the first time and deal with significant demonstrations that could affect its mining—and crucially platinum mining—sector. 

Are there any markets that are most vulnerable to any of these risks? (Automotive, consumer electronics, medical, food/agriculture, energy, or others?)

Bey: Industries closest to national security—high technology, semiconductors, aerospace, and automotive industries—are likely to be the most vulnerable to these risks, particularly as the U.S. and China focus on them. 

How should engineers and manufacturers protect themselves against these risks in 2024? 

Bey: Given the variety of risks companies face this year, companies should be putting into place comprehensive enterprise risk management strategies going beyond traditional focuses on financial, compliance, and security risks, as geopolitical risks are more frequently the root cause of other risks that companies are more accustomed to.