External Affairs Minister S Jaishankar outlines four-part framework for global economic resilience

External Affairs Minister S Jaishankar has outlined a four-part mantra for businesses and policymakers navigating a world increasingly shaped by geopolitical tensions, supply-chain disruptions and market distortions.

De-risk first, Jaishankar says

Speaking at the Economic Times World Leaders Forum, Jaishankar said reducing exposure to potential disruptions should be a priority for businesses and governments.

"De-risking would be my biggest mantra, as you called it. And the second would be to diversify."

He said having more partners and sources of supply can help countries and companies reduce their dependence on any single source.

"So the more partners, more sources that you have, clearly to that extent, you have re-rested."

Diversify supply chains

Jaishankar said diversification should form a key part of how businesses respond to a more uncertain global environment.

He argued that companies should avoid excessive dependence on individual suppliers, markets or routes, particularly as geopolitical tensions increasingly affect trade and supply chains.

Prepare for market distortions

Jaishankar's third principle was to account for distortions in global markets, which he said are increasingly being driven by geopolitical choke points.

"The third to deal with distortions. I mean, today, for example, we are finding a very distorted energy market, a very distorted fertilizer market, very distorted shipping."

He said businesses need to recognise that disruptions in key areas can have consequences well beyond the countries directly involved.

‘Distrust and diversify’

For his fourth principle, Jaishankar said businesses should move beyond the traditional idea of trusting systems while verifying them.

"You know, don't let your supply chains really be just in time anymore. Don't always assume that the lowest cost will be the determinant."

He said companies should instead assume that disruptions are possible and build safeguards into their planning.

"Today, you have to build in that margin of safety."

Build resilience into business decisions

Jaishankar cited energy markets as an example of why companies need to rethink their approach to supply chains and costs.

"So, even for businesses, I think the supply chains. The more you diversify it, the more you you hedge, because you can't trust the world to work in the most efficient manner because of all these distortions."

He said the approach applies equally to governments and businesses and is likely to remain relevant as geopolitical and economic uncertainty persists.

"I think this is this is the reality reality of the world, and it applies to national policymakers. It applies to enterprise decision making. This is the foreseeable future."