Firms warned of potential risks as North Korean tensions rise

Companies in South Korea or those using suppliers in the region should prepare for the worst as North Korea continues to destabilise the region, warns Control Risks.

North Korean state media has announced that the country was developing plans to fire four intermediate-range missiles towards Guam – which hosts some important US military facilities – after US President Donald Trump said that North Korean threats to the US “will be met with fire and fury”.

The escalating rhetoric follows a 5 August UN Security Council (UNSC) resolution that places the most stringent sanctions to-date on North Korea – a response to the country’s two ICBM tests in July.

“Military attacks remain a highly unlikely next step, but recent developments have increased uncertainty and miscalculation risks beyond the normal periodic increases in tension,” said Control Risks’ director of risk analysis for North Asia, Andrew Gilholm.

“More North Korean missile or nuclear tests are likely in the coming weeks, both for technical and strategic reasons, suggesting that further escalation is more likely than de-escalation.”

Gilholm said the new sanctions will, if rigorously implemented, put significant strain on Pyongyang’s finances, but not enough to make it abandon its key weapons programs.

“If they haven’t done so already, companies operating in South Korea - or with critical suppliers there - should begin to assess their potential exposure and how they might respond should the security environment on the peninsula deteriorate,” added Gilholm.