News / Re-shoring in these days of geopolitical tension carries risks

© Olivier Le Moal

Domestic political tension across almost 75% of emerging manufacturing markets has raised major question marks over the diversion of global supply chains away from China.

Analysing five-year trends across 40 markets making up the ‘near-shoring/friend-shoring arena, Verisk Maplecroft discovered that 27 countries were facing issues of civil unrest, government instability, exposure to conflict or terrorism, and more.

Principal resilience consultant for the report Olivia Dobson told The Loadstar: “What we are trying to show is when it comes to re-shoring, alternative locations have their own risks.

“Companies need to be cognisant that diversification may trade one risk environment for another. Of course, this comes in a moment where we have witnessed the emergence of a multitude of simultaneous crises.”

The report highlights that these risks were not confined to the global south, with Hungary, Poland and Slovenia all witnessing marked increases in their political risk scores.

Exemplifying the swapping of risks while abandoning China may make for good business sense for US companies, as relations between the two superpowers continue to deteriorate, Mexico ranked fifth when it came to expectation of civil unrest over the next 12 months.

This year represents the largest global election year on record, with more than half the world’s population in regions that will go to the polls this year, raising concerns for unrest.

Among them are key reshoring hubs like India, Indonesia, Mexico, Poland and Turkey, all featured in the report and seeing the chance of civil unrest having grown since 2019, when the investigation began.

Ms Dobson sought to stress that the drivers of civil unrest were “nuanced” and differed across jurisdictions, but “of course included economic hardship”.

However, Ms Dobson noted that there were positives to be drawn from the report. She added: “What we’re seeing is a lot of supply chain risk questions. Supply chain resilience is an area companies want to understand. This is a positive as it is pushing towards a desire to understand suppliers and supplier networks, and to create stronger, more resilient chains.

“Doing this drives a best practice approach and spotlights vulnerabilities. All of which drives them to learning a wider range of risks.”

Asked whether she foresaw any major change in the make-up of global supply chains as a consequence of deepening geopolitical divides, Ms Dobson said she thought this “very unlikely”, because “large-scale changes are quite hard to effect”.