Increased geopolitical competition and a more frequent use of economic statecraft in international conflicts augment the level of geopolitical risk for firms. Sanctions, import- and export embargo’s and boycotts have an impact on streams of resources or finished products through global supply chains and markets.
Many companies only deal with political risks on an ad hoc basis. They use credit and other insurance and have their local affiliates follow local political risks.
What these firms miss is a systematic analysis of the geopolitical, cross-border risks, they face. Geopolitical risks analysis focuses not only on local risks in multiple countries but also on the relationships between the different countries and the related risks. A systematic analysis brings a better overview of the risks on the strategic level that can’t be reached by just making the sum of local political risks.
In geopolitical risk analysis, we regard a firm as one big network. We identify the countries of origin of the resources, the locations of the production sites, the markets in which the products are sold and the transport routes between these locations. On this basis, we identify the critical bilateral relations where geopolitical risks exist risks for the firm.
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