RISKS REVEALED

The big picture

NEW TRADE PATTERNS MEAN NEW RISK PATTERNS

Winners of global trade also present the HIGHEST RISK

For buyers, new locations do not always equal a risk reduction. The Global Sourcing Risk Index data highlights that these growth economies are some of the riskiest among the 30 analyzed and, in some cases, worldwide. This means that while some organizations may be making informed, strategic decisions about their sourcing, others may be unknowingly trading one set of risks for another.

As global trade patterns shift, winners and losers emerge. Among developed economies, Mexico, Turkey, and India have seen a surge in exports and foreign direct investment. Meanwhile, several APAC and LATAM economies are benefiting from China plus one and dual-sourcing approaches.

Russia, in third place, has seen a major breakdown in trade ties with the West since the 2022 invasion of Ukraine. EU gas imports from Russia have fallen by 80%, primarily replaced by flows from Norway, the US, and Qatar. Meanwhile, critical materials like nickel, palladium, and titanium are being sourced instead from Australia and South Africa, countries that rank lower on the index at 16 and 21, respectively.

Russia has pivoted toward trade with non-sanctioning countries such as China, India, and Turkey. Buyers should be aware of indirectly breaching sanctions. India scores fourth on the index, with notable rankings for human rights and climate risk.

The remaining six countries in the top 10 are in the APAC region, with the exception of Colombia, an emerging powerhouse in South America. This concentration of risk aligns with common traits in emerging economies: less developed labor laws, higher exposure to natural disasters, and governance gaps. These risks often correlate directly with industry footprints. For example, manufacturing is a major sector in Southeast Asia, offering cost advantages but also amplifying operational risk due to local conditions.

While Mexico and Turkey may appear as winners in the global trade reconfiguration, they also rank first and second in the composite risk index. Both can be considered high-risk sourcing locations. Buyers should be aware of geopolitical instability, weak compliance, governance challenges, and human rights concerns. Mexico also features highly for supply chain concentration, while Turkey is significantly exposed to input price volatility.

High risk is not always a function of lower economic development. While upper-middle / high-income countries such as Turkey and Russia are among the riskiest countries, less developed countries such as South Africa and Brazil fall outside the top 10. The least vulnerable countries in the index are the UK, Germany, and Switzerland, which reflect the stability, regulation, and predictability typically found in advanced European economies.

The following pages dive into each risk category, unpacking the drivers behind high-risk country-sector pairings. When considering any change to sourcing in response to the risks explored, there are three fundamental aspects for procurement professionals to consider:

Levels of (required) supply chain transparency
Alignment with the organizational risk appetite
The data needed to make informed decisions

Switzerland, Germany & the UK rank as the LOWEST RISK
in The Index