Tensions between the United States and North Korea have ratcheted dramatically in the last several weeks following missile tests by North Korea. Kim Jung-Un, the notoriously unpredictable dictator of North Korea, has threatened the United States, initially saying the country has successfully miniaturized a nuclear weapon that could fit on an intercontinental missile and reach the United States. US President Donald Trump bristled, saying the US would respond “with fire and fury like the world has never seen” and bragging about the “size and strength” of the US nuclear arsenal. Kim, never one to back away from a fight, then threatened to shoot missiles toward Guam, a US territory and home to 163,000 people. Guam also has a disproportionate amount of nuclear forces and US military facilities, making it a tempting target for the headline-seeking Kim.
While the public chest-thumping and missile bragging between the two countries are not new, they illustrate a real threat, particularly to the Korean peninsula. Any military conflict would endanger the people and facilities in the area, impacting not only military targets but also civilian and commercial – or “soft” – targets. South Korea would face significant disruptions at a minimum, with the impact ranging from loss of power, water, and transportation to bombings and other threats to physical security.
There are massive implications for the rest of the world even if a conflict remained relatively isolated. Military action involving North Korea would likely spread to other actors. Despite the love-hate relationship between China and North Korea, Beijing almost certainly would weigh in if the conflict escalated, with Japan potentially participating as well. In other words, any military activity could quickly spiral into a world war.
Worldwide supply chains would also face major disruptions if the conflict reaches new levels. South Korea is a major exporter of automobiles and auto parts. It also supplies 40% of global LCDs (liquid crystal displays), 17% of the world’s semiconductors, and three of the worlds largest shipbuilders.
Any multinational company with exposure to the Korean peninsula and Asia as a whole should recognize the fiery rhetoric as a warning to establish or update contingency plans. Multinational companies have a responsibility to safeguard employees and their families stationed abroad and must evaluate the risk facing these individuals given the current climate. Additionally, companies need to assess the potential for transportation or supply chain disruptions and model escalation scenarios and examine a multitude of options. Questions include: When do you evacuate? To where? How can you ensure safe transport of products? What are alternate suppliers? A strong contingency plan will also assuage employee jitters related to the fear of the unknown.
Despite the missile-rattling and one-upmanship, no one wants war. Even erratic Kim likely understands that a military conflict signals the end of his dynasty, an outcome he will try to avoid. A misstep or mistake could spark conflict, but the most likely outcome of this particular set of fireworks is a diplomatic face-saving settlement that de-escalates tensions and at least temporarily calms the turbulent waters. However, the kernel of conflict will remain far from resolved, making it crucial that anyone with operations or relations on the Korean peninsula retains an up to date, thorough, and competent contingency plan. The price of being unprepared is simply far too high.