Related News

UK firms pursue supply chain transparency amid regulatory pressures: Santander

Global trade set to bounce back after sluggish 2023: WTO

US court upholds forced labour embargo against Ninestar

Dollar alternatives not a major illicit finance threat, US says

Oil trading scheme netted vast sums for Iran’s Revolutionary Guard: US prosecutors

Political risks are on the rise in 27 out of 40 emerging market manufacturing hubs such as Indonesia, Mexico and Poland, posing further risks to supply chains, fresh data shows.

Risk intelligence firm Verisk Maplecroft looked at five-year trends in countries that form “a major bloc of the ‘nearshoring’/‘friendshoring’ universe” and found an uptick in risks of civil unrest, government instability and exposure to terrorism.

The 40 emerging markets make up 20% of global manufacturing output, which is “broadly equivalent to China”, the report says.

More than three-quarters of the emerging markets assessed saw a rise in civil unrest risks during the last five years, with all 40 countries classed as high or very high for the risk over the next 12 months.

Mexico – now the primary source of goods to the US – ranks fifth on Verisk Maplecroft’s forecast for civil unrest risks over the next year, while Bangladesh is seventh highest following wage-related protests in textiles factories in November last year.

The threat of political risk in Indonesia also increased due to economic inequality, after workers criticised the proposed minimum wage for 2024 for failing to keep up with the cost of living and staged demonstrations in response.

The report also highlights US/China tensions. Patrick Roberts, supply chain expert at Verisk Maplecroft, says “the continuing use of trade and investment strategies by the world’s two superpowers to increase their sway in Asia-Pacific and the Global South will force many countries to walk a neutral line to derive maximum benefits”.

“For those looking at establishing future supply chain resilience, understanding these dynamics will be crucial,” Roberts adds.

Hungary, Poland and Slovenia have seen an increase in civil unrest and government instability risks, Verisk Maplecroft says, especially since Russia’s invasion of Ukraine “created a unique set of emerging supply chain risks” for neighbouring countries.

The conflict between Israel and Hamas also continues to ramp up risks in the Red Sea, forcing ships to take alternative routes and contributing to the “crucible of geopolitical tensions” testing supply chains, the report says.

“Interstate allegiances and dependencies” are reshaping trade relationships, it adds, with EU and US measures on finances, assets, trade and services hitting a five-year high, according to the firm’s latest trade sanctions index.

“In an increasingly dynamic world, supply chain professionals looking to operate more strategically and build resilience need to create as much certainty as they can,” says Olivia Dobson, principal risk consultant at Verisk Maplecroft.

“Tracking political risks in manufacturing hubs and logistics pinch-points and using scenario analysis to map potential geopolitical shifts can help organisations understand where the next shocks could come from,” Dobson adds.

Geopolitical conflict was also a top risk in the World Economic Forum’s most recent risk report, along with the consequences of climate change and the impact of artificial intelligence.