Preparing for High-impact, Low-probability Events: Lessons from Eyjafjallajökull
value and the percentage that departed by air.9 Goods to
air-freighted to their destinations. The total value of
the top right of the chart have a high value and high share
imports of these categories to the EU was €7 billion, and
of air freight. Key intermediate goods such as integrated
about 80% of them were air-freighted. Data-processing
circuits, sensors, data storage and fine chemicals can
machines and data-storage devices also rank within the
be identified – these are components in a wide range of
top 20 imports by value, with over half of these goods
manufactured goods. Other notable categories include
being air-freighted. Each of these electronic components
industrial diamonds, aerospace components and medical
is critical for an ever-increasing range of applications,
products, including vaccines. Analysis of imports to the
such as personal computers, mobile phones, automobile
EU highlights a similar range of products.
electronics and other telecommunications equipment. The
In 2009 about 90% of the semiconductors, microprocessors and digital signal processors exported from Europe were
total value of the final products for which intermediate products are required far exceeds their direct value.
Box 2: The Tōhoku earthquake and the supply-chain knock-on effect Beyond the initial threat posed by the earthquake and consequent tsunami, emergent secondary and tertiary impacts have cascaded unpredictably, testing emergency response and support infrastructure to or beyond their capacity, with slow-burn disruption threatening recovery in the longer term. For example, the early rolling blackouts which beset waste treatment plants, supermarket refrigerators and reactor core cooling pumps persisted into the subsequent months. With reactors remaining offline and utilities unable to meet summer demand, the Japanese government imposed restrictions across users in order to bridge the residual electricity supply gap. The 15% reduction from the peak demand mainly affected the western Kansai region and northeast mainland area, further blighting manufacturing in the hard-hit Tōhoku region, which accounts for around 8% of the country's GDP. A stable electricity supply is essential for the high-precision manufacturing techniques employed in the electronics industry – the premier industrial sector in Japan, accounting for around a quarter of exports by value. Despite the lifting of the 15% restriction in September 2011, uncertainty surrounding the longer-term availability of Japan's nuclear plants remains, particularly following pressure from local government to close plants if they fail stringent safety assessments. In the event of such a failure across the fleet, it is conceivable that all 54 nuclear reactors in Japan could be shut by March 2012. The Japan Centre for Economic Research estimates that, without nuclear power, GDP in 2012 would be 1.6% lower than it would otherwise be.a There is clear evidence of disruption to global supply chains, according to an analysis by HSBC. The bank notes that ‘Japan is not as crucial to the global economy as it was 20 years ago, but it remains a big producer of cars and electronic components, especially D-Ram and flash memory.’b Moreover, the thirst for outsourcing has made many supply chains geographically diverse and complex. As firms rationalized their businesses and contained costs, their production processes became more vulnerable to problems at individual suppliers or ports. According to the World Bank, global industrial production declined 1.1% in April 2011 in the wake of the tsunami and earthquake, probably reflecting supply-chain disruptions.c a Japan Centre for Economic Research, ‘Impact to last decade or more if existing nuclear plants shut down – GDP could drop 2% on power shortages’, 25 April 2011: www.jcer.or.jp/eng/research/pdf/pe(iwata20110425)e.pdf. b HSBC, ‘Double Trouble’, 2011, www.businessthinking.hsbc.co.uk/double-trouble. c World Bank, ‘Japan tsunami and earthquake – Prospects Weekly: Global industrial production declined 1.1% in April in the wake of the tsunami and earthquake in Japan’, 26 June 2011, available at: http://blogs.worldbank.org/prospects/category/tags/japan-tsunami-and-earthquake.
10 9
For clarity, only goods with a total import value of €2bn are shown.
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