Strategic foresight does not mean predicting events. It means knowing where a company is concentrated before something goes wrong. That concentration may take the form of dependence on a single customer, a particular supplier, or a specific product. This year, the shipping sector tested one of those concentrations in Saudi companies: concentration in shipping routes.

As tensions escalated in the Arabian Gulf, marine insurance rates for shipping through the Strait of Hormuz rose from roughly 0.25% of vessel value before the crisis to roughly 10%, according to Standard & Poor’s citing insurance brokers. That passed directly to the carriers. Hapag-Lloyd imposed a risk surcharge of up to US$3,500 per container transiting the Gulf.

Cargo consequently shifted to the Red Sea, and Jeddah became the alternative gateway. That shift, however, generated costs of its own. Yard utilization at Jeddah Islamic Port reached roughly 90%, and MSC imposed a congestion surcharge of US$500 per container on all Jeddah-bound shipments. Some carriers suspended their direct calls at the port, while CMA-CGM cut its sailing frequency from weekly to fortnightly, which raised the cost of shipping to Jeddah as supply fell and demand rose.

The result is that companies which avoided mounting insurance costs found themselves facing comparable costs elsewhere. There was no longer a customary route or an established freight rate, but two routes, each carrying high costs of its own.

This is where the risk of concentration becomes clearly visible. A company that signed long-term supply contracts on a cost model built on earlier freight rates has committed to fixed margins for the life of those contracts against costs that have since changed. To that is added a less visible effect. Longer shipping times mean working capital stays tied up in goods for longer, and it is the same capital the company needs to fund its existing financial cycle, while it may also incur penalties for missing delivery dates. All of this represents strategic risk to the company.

What distinguished the companies that absorbed this challenge early was not that they predicted these tensions before they occurred. It was that they already knew the degree of concentration in their supply chains and what its disruption would do to their margins and contractual obligations, and had put plans in place for such possibilities, whether by diversifying routes or by pricing risk into their contracts. That knowledge requires no prediction of events, only a careful review of strategic foundations.