The Risk That Feels Like Stability

The Risk That Feels Like Stability

Today I want to talk about something very fundamental.

Risk. Specifically, the kind of risk that hides in plain sight because everything is working fine, until it isn’t.

First let's consider what’s happening with the Strait of Hormuz right now. This narrow waterway in the Middle East has been largely blocked since late February. It’s the maritime corridor through which around 20% of the world’s oil supply, 20% of global LNG trade, and 30% of the world’s seaborne fertiliser exports normally pass.

One chokepoint. A fifth of the world’s energy. A third of its fertiliser.

Oil prices have surged. Fuel shortages are hitting parts of Europe and Asia. Fertiliser prices have jumped 50% since the crisis began. The head of the International Energy Agency has called it the greatest global energy security threat in history.

And it’s all because the world built a critical dependency into a single point of failure.

It’s not just oil.

Every advanced chip that powers smartphones, car electronics, AI and data centres requires a specific piece of manufacturing equipment called an EUV lithography machine. There is one company on Earth that makes them, ASML, based in the Netherlands. Their market share in this technology is 100%. Not dominant. Not leading. One hundred percent. If something disrupted ASML’s ability to deliver, the entire global semiconductor industry would stall.

And who uses those machines to manufacture the chips? Overwhelmingly, one company, TSMC, in Taiwan. The majority of the chips that drive modern technology all rely on the same manufacturer, on an island in one of the most geopolitically sensitive regions in the world.

You couldn’t make this story up!

If you were looking at this from the outside, you’d call it reckless. And yet here we are.

The reason I’m writing about this isn’t geopolitics. It’s because the same pattern occurs in many businesses.

Nobody designs concentration risk into their business on purpose. It accumulates. Every individual decision that creates it is usually a good one at the time.

You kept that major client because they’re profitable and the relationship is strong. But now they represent 35% of your revenue, and if they left, you couldn’t make payroll for two months.

You stayed with that supplier because they’re reliable, high quality and their pricing is competitive. But you’ve never tested an alternative, and if they couldn’t deliver next month, you don’t have a backup.

You never documented how that part of the business runs because Sarah has always handled it and she’s been with you for twelve years. But if Sarah was off for six weeks, nobody else would know where to start.

You’ve been meaning to upgrade that IT system for years, but it works well enough and the cost of replacing it feels hard to justify. Meanwhile, it’s running on infrastructure that wouldn’t survive a serious cyber incident.

And then there’s the one nobody wants to talk about. You. The owner who holds the key client relationships, makes the critical pricing decisions, carries the knowledge of how things really work, and is the bottleneck for every significant call. If you were out of the business for three months, how much would keep running the way it does now?

None of these feel like a crisis. They feel like the way things are. And that’s what makes them dangerous.

Because that’s exactly how the global supply chain ended up dependent on one strait, one chip manufacturer, and one equipment maker. It wasn’t through negligence but rather through optimisation. Everyone was looking for efficiency, cost, and reliability. And the system quietly became fragile.

The same forces are at work inside your business right now.

Concentration risk almost never announces itself. It builds gradually, one sensible decision at a time, until the moment it breaks. And by then, the cost of fixing it is dramatically higher than the cost of preventing it.

The businesses that handle this well aren’t the ones that eliminate every risk. That’s not realistic.

They’re the ones that know where their risks are. They’ve looked honestly at their major dependencies and asked a simple question: if this disappeared tomorrow, how long could we survive, and what would break first?

Most business owners have never done this exercise. They’re busy and everything’s working, so there’s no trigger to ask the question. The trigger usually arrives when it’s too late.

The Strait of Hormuz was open for decades. Oil, gas, fertiliser all flowed. And then one day it didn’t, and the world discovered what it had built.

The world’s concentration risks are now front-page news. Yours probably aren’t.

But they’re there.

How many things in your business are working fine right now only because nothing has gone wrong yet?

Kylie.