Managing geopolitical risks in global value chains: insights and strategies

Today’s global economy is highly interconnected and therefore highly vulnerable to various geopolitical risks that can significantly impact business operations. As a former mayor of a border town in Arizona, Director of the Arizona Department of Commerce, Chief of Staff of US Customs and Border Protection, and now CEO of Intermestic PartnerI have witnessed first-hand the profound impact these risks can have on global value chains (GVCs).

Geopolitical risks include political, social, economic and cultural aspects that may arise from changes in political leadership, political change, conflict and economic instability. These risks can affect investment flows, trade policies, market dynamics and the general business environment.

GVCs encompass a range of activities, from design to production, marketing and distribution, and span multiple countries. Geopolitical risks can disrupt these operations by changing policies, causing conflicts or introducing protectionist trade measures. For example, the US-China trade war posed significant challenges for companies integrated into the supply chains of both countries, such as Apple, which saw a decline in iPhone sales. Similarly, the COVID-19 pandemic has highlighted the vulnerability of global supply chains due to differing responses from governments around the world.

To overcome these challenges, companies must implement effective risk mitigation strategies:

1. Diversification of supply chains: Expanding operations across multiple regions can reduce dependence on a single location.

2. Invest in local adaptations: Building local capacity can reduce dependence on extended supply chains.

3. Advocating for a transparent trade policy: Exchanges with government representatives can provide clarity about future political directions.

Geopolitical risks are likely to persist, requiring proactive risk management. Companies should leverage technology, develop risk modeling tools, and develop robust business continuity plans to safeguard their operations.

In today’s interconnected world, it is critical for companies to understand and manage geopolitical risk. Flexible and robust strategies are essential to effectively navigate this risk landscape and ensure long-term success.

At Intermestic PartnerFounded in 2011, we specialize in cross-border trade and development. We have worked with leading national and international companies and offer unparalleled expertise in managing geopolitical risks. Work with us to prepare your company for these challenges and succeed in the global market.

For further information and expert advice on mitigating geopolitical risks, please contact us at Intermestic Partner.