Geopolitical Risk

Addendum to the Reshoring Initiative Total Cost of Ownership Estimator

Introduction:

Firms are exposed to external geopolitical risk by the global actions of the countries that they do business with and of neighboring countries, e.g., other Asian countries might be impacted by U.S.-China conflict. The importance of factoring in geopolitical risk when making sourcing decisions for your business has surged in the last few years. Naturally, predicting future events is inexact and the assessment of risk is subjective. Below are appraisals of the geopolitical risk to U.S. firms sourcing in each listed country or region materials for assembly or sale in the U.S. In the heading of each section, we included our estimate of risk. Geopolitical risk (GPR) is the probability in one year of a major disruption in trade resulting in the cessation of imports from that country to the U.S. as a result of an adverse geopolitical event.

These appraisals can be used as a starting point for assessing your geopolitical risk exposure. Please note that geopolitical realities are constantly changing. Therefore, it is important to do a detailed assessment of the specific countries that your firm is or is considering sourcing from, particularly in the cases where we have provided only broad regional estimates.

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Last updated 8/21/2023.