Multinationals are diversifying their supply chains to build greater resilience face growing political risk and civil unrest threat in the majority of emerging market manufacturing hubs according to risk intelligence firm Verisk Maplecroft.
A new study by Verisk reveals increasing political risks across 27 of 40 emerging market manufacturing hubs. The study analysing five-year trends in these 40 emerging markets that make up a major block of the nearshoring/friendshoring universe, the Verisk political risk data reveals increasing risk across a combination of issues in 27 of these countries. These include major manufacturing hubs, such as Indonesia, Mexico, Poland, Thailand and Türkiye.
These are among the countries running an increased risk of civil unrest, government instability or exposure to conflict and terrorism, which threaten to disrupt production, according to the study.
Civil unrest is the standout threat but disruption from other political risks, including government instability and exposure to conflict and terrorism, are also posing challenges that need to be factored into supply chain strategies.
Civil unrest is the main driver for an increase in political risk in emerging market manufacturing hubs. All 40 countries analysed are classed as running high or very high civil unrest risk over the next 12 months.
The research study reveals that political risks have increased for 70% of the emerging market manufacturing hubs, which companies have started to use to mitigate geopolitical risks and delays in receiving supplies further afield, in particular from China.
The conflict between Israel and Hamas has highlighted vulnerabilities in a vital international logistics route. Without access to the Suez Canal, alternative routes from Asia to Europe and the Americas around Africa are significantly longer, with increased costs that will ultimately be passed on to consumers.
Russia president Vladimir Putin’s invasion of Ukraine has also weighed on political risk scores for the emerging manufacturing markets of Hungary, Poland and Slovenia. They all recorded a rise in civil risk unrest and more pronounced government instability since the start of the Ukraine War. M