Rising Geopolitical Supply Chain Risks: From Traditional Contingency Plans to a Three-Tier Resilience Framework

Event Overview

The spring 2026 issue of *MIT Sloan Management Review* published the research article “Stay Ahead of Geopolitical Supply Chain Risks.” Its authors include Morris A. Cohen, Shiliang Cui, Vinayak Deshpande, Ricardo Ernst, Arnd Huchzermeier, Daniela Muhaj, David Pyke, and Andy A. Tsay, with affiliations including The Wharton School, University of Pennsylvania; Georgetown University’s McDonough School of Business; the University of North Carolina’s Kenan-Flagler Business School; WHU – Otto Beisheim School of Management; the University of San Diego’s Knauss School of Business; and Santa Clara University’s Leavey School of Business, among other institutions.

The article’s central thesis is that traditional supply chain risk management methods designed for natural disasters, supplier failures, and short-term market volatility are no longer effective when facing persistent, politically motivated disruptions such as trade wars, sanctions, and armed conflict. Based on research on 13 multinational companies, the authors propose a three-part framework to help managers organize their judgment in a continuously changing environment: identify geopolitical signals, pre-position flexible options before risks emerge, and adjust rapidly after events occur.

Supply Chain Background

Geopolitical risk differs in nature from traditional operational risk. Natural disasters and supplier bankruptcies are usually discrete events, with relatively definable scope and clearer recovery paths; geopolitical disruptions, by contrast, are characterized by persistence, political motivation, and cross-regional transmission. Their evolution depends on policy and security conditions, making it difficult for companies to extrapolate from historical data.

The article notes that long-standing U.S. trade policy has been disrupted and predictability has declined; war or acts of terrorism may overnight overturn management’s existing assumptions about security risks. At the same time, the scale and complexity of modern manufacturing networks make the propagation path of a single event through the network difficult to predict—a problem at a tier-2 or tier-3 supply node may propagate through critical components, specialized equipment, or logistics nodes to multiple end-product lines.

The authors also acknowledge that the companies in the study face real constraints: obtaining information beyond tier-1 suppliers is itself difficult, so even leading companies may have only a partial picture of their supply chains. This constraint directly determines the upper limit of risk-monitoring precision.

Corporate Decision-Making Logic

The framework proposed in the article consists of three pillars.

First, understand the signals. Through scenario planning and risk monitoring, translate external signals such as policy changes, sanctions lists, and conflict situations into assumptions and trigger conditions for one’s own supply network. The article cites relevant research on how scenario planning is put into practice, emphasizing that its value lies in continuous updating rather than one-time output.Second, pre-positioned options. When risks have not yet materialized, establish flexible options that can be deployed, such as alternative supply sources, switchable capacity and logistics routes, and adjustable contract terms. The value of flexible options lies in shortening response time after an event occurs, not in pursuing the lowest procurement cost under normal conditions.

Third, rapid adaptation. After an event occurs, adjust the procurement network and supply arrangements according to established logic, and maintain decision-making speed within the organization.

The authors emphasize that firms may respond to the same risk in different ways, that there is no single solution, and that there are no guaranteed outcomes. However, among the firms they studied, there was one common practice: they already had, or were working to have, end-to-end supply chain visibility, and prioritized understanding the contributions and risk exposures of suppliers and customers at every tier.

Supply Chain Implications

Supplier management. Procurement shifts from simple price comparison to assessing the political and security attributes of supply sources, and supplier tiering (Tier 1, Tier 2 and below) and information acquisition capabilities become management prerequisites.

Manufacturers and capacity footprint. The cost advantage of a single site needs to be weighed against the degree of risk exposure; dual-sourcing, multi-sourcing, and regionalized footprint are more likely to be incorporated into capacity planning.

Logistics companies. The substitutability of transport routes, concentration of key nodes, and stability of lead times become important dimensions for customers evaluating logistics solutions, not just freight rates.

Procurement systems. Procurement strategy evolves from annual tendering and cost orientation toward comprehensive assessment that includes risk clauses, switching costs, and response times.

Inventory systems. Safety stock and buffer levels for critical materials may be recalculated, with the basis shifting from historical volatility to scenario assumptions, raising holding costs in the short term in exchange for delivery continuity within a certain range.

Regional industrial chains. The attractiveness of industrial clusters depends not only on costs and supporting facilities, but also on the policy stability and corridor security of the region.

Regional Implications

The article itself does not provide regional conclusions one by one, but based on its framework, risk exposure paths differ across regions.

Asia is the densest region for global manufacturing and intermediate goods trade, and trade policy or corridor disruptions may be amplified through the flow of components. Europe faces transmission from energy, shipping corridors, and conflicts in neighboring regions at the same time, and nearshoring and friend-shoring arrangements within the region may be further refined. North America's trade policy adjustments intertwine with nearshoring manufacturing trends, and procurement network restructuring is more manifested as intra-regional substitution. In the Middle East, corridor and security factors are directly related to shipping reliability and lead times. Latin America takes on part of the capacity transfer in nearshoring manufacturing, but the depth of supporting facilities and logistics efficiency determine its capacity to absorb it. Africa is more positioned in resources and primary processing, and is affected by changes in demand for critical minerals and investment direction.

The above judgments are framework-based deductions, and the specific impact still depends on each company's own network structure and degree of risk exposure.

Future Trends

Over the next 1 to 5 years, the expected directions of evolution include several items.

Normalization of scenario planning. Geopolitical assumptions will enter annual and quarterly planning processes, alongside demand forecasting and capacity planning.The costs of flexible options are made explicit. Companies will incorporate switching costs, spare capacity, and dual-sourcing premiums into total cost models, rather than looking only at unit purchase price.

Visibility extends across multiple tiers. Digital investment is more likely to focus on identifying and tracing second-tier and lower-tier suppliers, as well as the real-time status of key nodes.

Introduction of analytical tools. Machine learning and other methods are used to identify hidden dependencies and transmission pathways in the network, premised on data quality and structured supplier information.

ESG and transparency requirements overlap. Disclosure requirements for compliance, country of origin, and labor information will share the same data foundation as geopolitical risk monitoring.

Organizational and governance adjustments. Responsibility for supply chain risk may rise from the operations level to a cross-functional risk committee, and decision speed becomes an implicit indicator of resilience.

The article also cautions that resilience investment needs to be tied to business value, avoiding allocating resources on a worst-case scenario as the norm.

Key Conclusions

• Traditional supply chain risk management methods focused on natural disasters and supplier failures are insufficient for persistent political disruptions such as trade wars, sanctions, and armed conflicts.
• The three-part framework proposed in the article—understanding signals, pre-positioning options, and adapting quickly—comes from research on 13 multinational companies, emphasizing process rather than a single answer.
• End-to-end visibility is a common baseline practice among companies, but obtaining information from suppliers beyond the first tier remains a widespread bottleneck.
• The core issue in geopolitical risk management is not predicting events, but shortening response time and switching costs after an event occurs.
• Rebalancing procurement costs, lead times, inventory levels, transportation efficiency, capacity footprint, and risk exposure will become the norm in supply chain decisions over the coming years.

Recommended tags: Geopolitical risk / Supply chain resilience / Scenario planning / Procurement strategy / Supply chain visibility

Related industry chains: Electronics and semiconductors, automotive and components, machinery and equipment, chemicals and materials, energy and shipping logistics

Related countries and regions: United States, China, European Union, Mexico, Southeast Asia, Middle East, Latin America

Information source: https://sloanreview.mit.edu/article/stay-ahead-of-geopolitical-supply-chain-risks