The Newest Line Item: Risk

Guest perspective from industry leaders
By Edward Hertzman

The newest line item in every profit-and-loss statement isn’t labor. It isn’t freight. It isn’t surcharges. It’s risk.

Perhaps it’s time we start accounting for it that way. For years, supply chain disruptions have been treated as anomalies, unexpected hits to margin, neatly explained away in quarterly earnings calls. “If not for X, we would have hit our numbers.” But what if X is no longer the exception? What if it is the model?

Consider the past several years: tariffs, pandemic shutdowns, port congestion, labor shortages, geopolitical instability. Now Iran.

At some point, the pattern becomes clear. Disruption is no longer episodic. It is structural. Which means the real anomaly isn’t disruption, it’s stability.

That suggests a fundamental shift may be needed not just operationally, but financially.

Perhaps companies need to recalibrate how they build their P&L statements. Not as if disruption is an unforeseen shock, but as a recurring cost of doing business. A line item under cost of goods sold: risk and disruption.

An expense that can be anticipated, modeled and absorbed, not explained away after the fact.

Because a clean quarter, no delays, no cost spikes, no bottlenecks should no longer be assumed. It should be considered an unexpected bonus.

The latest conflict, centered around Iran, is once again tightening energy markets, shifting shipping routes and driving up costs. For retailers, the effect is cumulative: oil, raw materials and transportation all rising together.

At the same time, time itself is becoming less reliable. Transit schedules slip. Capacity tightens. For companies built on just-in-time inventory, the consequences are immediate: stockouts. For years, the industry optimized for efficiency. It worked in a more stable world. But efficiency without margin is fragility.

The question is no longer how to avoid disruption, it’s how to plan for it.

Because in today’s environment, resilience not perfection is what wins.

The views expressed are those of the author and do not necessarily reflect the official position of the International Apparel Federation.