Managing the new political risks in manufacturing

Manufacturing is in the political risk firing line. The sector is central to geostrategic competition between nations, a focus of government efforts around resilience and reshoring, and exposed to unavoidable political risk loss through conflicts.

To help manufacturers navigate a path to continued growth against this dynamic geopolitical landscape, WTW worked with Oxford Analytica and manufacturing sector experts to produce the Managing the new political risks in manufacturing report.

We sought answers for the manufacturing sector on today’s urgent political risk questions:

• How will geopolitical shocks reshape the footprint of globalized manufacturing companies?
• How can manufacturers used to flying below the geopolitical radar manage political risks?
• What political risks will manufacturers face if concerns about the relationship between China and the West continue to escalate?
• What further political risk perils should manufacturers monitor as they emerge?

Managing the new political risks in manufacturing: Key findings

• The top concerns of manufacturing executives relate to geopolitical competition between great powers. The conflict in Ukraine has resulted in severe losses, particularly for those companies exposed via supply chains once integrated through Eurasia. The deterioration in relations between China and the West is also requiring manufacturers’ political risk vigilance.
• Supply chain shocks are increasingly strategic rather than operational, impacting entire classes of goods or entire countries.
• Manufacturers are apprehensive over the European Union’s role in setting standards in areas such as data privacy, climate and broader environmental, social and governance (ESG) regulation.

Understanding manufacturers’ political risk radar

WTW and Oxford Analytica conducted in-depth interviews with manufacturing executives to create a manufacturing political risk radar.

For one of the top risks manufacturing executives identified, Oxford Analytica commissioned scholars from its expert network to produce a peer-reviewed essay, included in WTW’s Managing the new political risks in manufacturing report, titled: 'New trends in sanctions and the risks for manufacturing'.

New trends in sanctions and the risks for manufacturing

Managing the new political risks in manufacturing highlights shifts in the way sanctions are used:

• Sanctions are increasingly targeting major world economies, a change from prior decades when sanctions programs worldwide typically impacted small economies.
• The new targeting of major world economies by sanctions programs may accelerate the division of the world into allied blocs that trade primarily amongst each other, a trend known as ‘friendshoring.’
• Friendshoring may provoke economic retaliation from targeted states and accelerate the decline of the U.S. dollar as a global reserve currency.
• Sanctions are being used an alternative to war, with a rapid innovation and growth in sanction designations.

To access more detailed expert perspectives on managing the political risks facing the manufacturing sector, download the full report, below.