The Current Situation
Following a brutal surprise attack by Hamas terrorists on Saturday, October 7, the Israeli cabinet officially declared war against Hamas on Sunday, October 8. It is estimated that around 100 civilians (including women, children, and the elderly) have been taken hostage from Israeli territory. Hamas threatened to start killing them. At least 22 U.S. citizens are among more than a thousand dead and at least 20 U.S. citizens are among hundreds missing. Israel’s Ambassador to the United States called this attack – which was on a Jewish holiday – “Israel’s 9/11.”
Prime Minister Netanyahu spoke to the country of Israel on Monday, October 9, and said operations were about to begin. To support Israel’s response, 360,000 reservists have been called up by the Israeli Ministry of Defense. In addition to fighting Hamas in Gaza, Israel is responding to attacks from Hezbollah at its northern border.
Israel is now an active war zone and has established an emergency unity government with a war cabinet. U.S. and other airlines have suspended flights, as have other non-U.S. carriers. Israeli authorities have suspended internal sports and commercial flights, as well. The last commercial flights out of Israel were on Sunday, October 8.
Select Global Response:
- Europeans have generally condemned the attack. The German government projected the Israeli flag onto the Brandenburg Gate. The British government projected the Israeli flag onto 10 Downing Street.
- Saudi Arabia has issued a statement in support of the Palestinians. We can expect the Israel-Saudi rapprochement to be affected – at least in the short term.
- In contrast, the UAE called the Hamas attacks a “serious and grave escalation.”
What Does This Mean for Businesses?
The external business exposure is in the IT and aerospace/defense sectors – not just Israeli-owned companies, but also foreign companies operating in Israel.
In terms of exports that could be impacted, Israel exports certain agricultural products and also chemicals, plastics, metals, and medical and industrial equipment. Israel’s diamond-cutting and polishing industry, centered in Tel Aviv, is the largest in the world and is a significant source of foreign exchange.
Regarding the energy sector, Israel has temporarily suspended production at its Tamar gas field and is seeking alternative fuel sources to meet its needs.
Without knowing exactly which businesses are in Israel, there is no way to understand supply chain impacts. Given Israel’s size, it is not a large exporter except in certain areas noted above. That said, it does have certain unique capabilities in advanced technologies, including software.
Even before the current outbreak, cyber operations were already a fact of life in Israeli-Iranian conflict: In April 2023 a likely Iranian cyberattack reportedly shut down water controllers for field irrigation and sewage systems in Israeli agricultural areas, temporarily stopping irrigation systems on affected farms.
Denial-of-service attacks targeting Israeli government and media websites have featured in the current conflict. Businesses should anticipate cyber tradecraft being employed against lifeline critical infrastructure sectors in combatant countries, and potentially beyond, as the conflict escalates.
What Should Businesses Do Next?
This is a fluid situation that is likely to continue for the immediate future – we don’t know what the extent of the Israeli military response will be and whether it will be limited to Hamas, or include its likely sponsor, Iran. Further, it is unclear to what extent Hezbollah or Iranian proxies in Iran or Iraq will seek to join Hamas in an expanded conflict with Israel.
The Israeli government is in control. Businesses operating in Israel – whether Israeli-owned or not – will have to follow the government’s advisories. There is no free-lancing.
Businesses impacted by the conflict should consider the following personnel and asset protection recommendations as well as supply chain risk management measures.
Personnel Protection
- Adhere to Israeli government guidance – Israel has one of the most well-exercised homeland defense apparatuses in the world; as noted above, business travelers and in-country workers will need to follow the government’s instructions—including sheltering-in-place and in ubiquitous bomb shelters throughout the country.
- Prepare for prolonged suspended air travel – Airline travel in and out of Israel has been suspended by most major carriers; it’s unclear when airport operations will resume normal scheduling.
- Exercise vigilance – Employees on the ground must practice enhanced situational awareness and remain vigilant for suspicious activity.
- Reduce non-mission-essential travel – Companies with employees and operations in Lebanon, should consider reducing non-mission-essential travel and establishing affirming and recurring contact with employees on the ground in the event of a regional escalation.
- Establish communications plan – It is expected that businesses will be trying to get in touch with their personnel to see whether they are safe and have communications.
- Companies should establish a communications plan, provide employees with a central contact number (e.g., global security operations center) or central person to routinely update status and maintain accountability (could be daily or weekly depending on severity).
- Avoid tunnel vision – continue to focus on global operations and personnel protection, while providing support and services to affected employees and their families.
Asset Protection
- Invoke business continuity plans, as needed, to transfer functions in affected areas to non-affected (or less affected) locations.
- Consider similar measures for assets in surrounding countries in the event of a regional escalation.
Supply Chain Risk Management
- Increased insight into supply chains – Thanks to COVID-19, many companies developed agility in their supply chains and mapped key suppliers, vendors, raw materials, and indirect materials that may be impacted by the current conflict or a regional escalation.
- Consider contingency plans for certain suppliers – Companies should consider conducting due diligence now for replacement suppliers to ensure suitable options exist in the event “lifting and shifting” the supply chain is necessary.
For further information or if you are concerned about your operations in the region, reach out to us at info@chertoffgroup.com.
