The ongoing US-Iran conflict isn’t just affecting the Middle East; its disruptive effects can be felt across boardrooms, dining tables, farm gates, transport hubs, retail shelves, and production lines. The illusion that a business located in Delhi or Abuja can be perfectly immune to whatever hitches plague a major business operating hub located far away is being eroded. Adapting operations and adopting survival strategies to prevent your business from being ‘choked’ by the prevailing event is very important at this stage.
Precisely, the conflict has triggered a surge in energy cost – a critical aspect of mobility as well as daily operations. Supply chains are being disrupted with deepening impacts on shipping and insurance costs. Consumers are not spared. Persistent inflationary trend fostered by the situation is eroding purchasing power.
Reuters captured the situation early in March, “For the first time in history, two of the world’s most critical maritime chokepoints are simultaneously compromised — the Strait of Hormuz and the Suez Canal/Bab el-Mandeb corridor, the latter under renewed threat after the Houthis announced they would resume attacks. Together, these two passages that connect Asia to Europe handle roughly one-third of the global seaborne crude oil trade and a significant share of containerised cargo.”
“The practical consequences for businesses extend well beyond higher shipping costs. The rerouting absorbs vessel capacity that was already stretched thin, meaning delays will cascade across trade lanes that have no direct connection to the Middle East”, it further reported
Also, supply Chain fintech company, Vendor Credit, explained the local effects of the conflict, “Because Iran controls the Strait of Hormuz—a chokepoint for 20% of global oil—the threat to this narrow waterway has since rippled through Nigeria’s supply chains. For Nigerian businesses — particularly vendors, suppliers, manufacturers, and large corporates — the effects already appear as rising energy costs, while shipping disruptions and supply chain delays are expected to intensify global inflation and slow economic growth.”
Consequently, we have seen lenders tightening policies to minimise exposure to the uncertain operating environment. Businesses and households bear the brunt. Trading Economics highlighted that consumers are resorting to survival strategies as a coping mechanism. Many take side hustles. Some are shifting spending patterns to strictly purchasing essential goods, especially for food and health. They go as far as tracking monthly price adjustments on useful portals to navigate the volatility. This great behavioural change indicates the scale of the Middle-East event on the globe.
Considering the scale of impact, businesses need to put in place operating buffers to stay afloat, continue market operations, and maintain market penetration. Here are a few approaches your business can adopt in managing the situation:
- Reassess Energy Strategy – Take a closer look at your broader energy sources. If your operation depends largely on diesel usage or the unstable power grid, which are currently being affected by oil price fluctuation and saboteur activities respectively, there isn’t a better time to have a rethink to minimise your risk exposure to surging energy costs and the spillover effects. You may need to consider adopting renewable energy solutions by investing in solar installation to stabilize cost.
- Audit supplier dependence – Are you heavily reliant on the highly contested Strait of Hormuz? Identify the reliance points and implement swift backup to reroute around alternative routes to avoid unnecessary delays that can affect client and consumer confidence.
- Prioritise positive cash flow – In operating sustainably, cash is king. Audit and prioritise expenses to master cash flow and strengthen the availability of working capital at this time. Venture Credit even share advice useful for a few advantages, “Vendors should therefore ensure they have Invoice Discounting from financial institutions or the Industrial Financing facilities provided under the new Nigeria Industrial Policy 2025 to bridge this gap.” You can also follow the popular 50/30/20 Rule by ensuring operating expenses are restricted to around 50-30%, and 20% go into mandatory savings.
