Concerned about geopolitical risk in third-party vendors? Many businesses overlook early warning signs that a vendor is vulnerable to geopolitical instability—until it’s too late.
Geopolitical risks aren’t just black swan events—they often come with warning signs. Identifying these red flags early can help safeguard your operations and minimise supply chain disruptions.
The Business Continuity Institute (BCI) Supply Chain Resilience Report 2021, which surveyed 173 firms in 62 countries, found that over 25% of firms experienced 10 or more disruptions in 2020, whereas that proportion was under 5% in 2019.
Here are five key warning signs to watch for in your third-party risk assessment.
1. Over-Reliance on a Single Country (Single-Source Trap)
If your vendor depends heavily on one country, your supply chain could be at risk due to:
- Natural disasters
- Political upheaval
- Economic downturns
For example, if a sole manufacturing hub faces sanctions or disruptions, your business could experience delays, increased costs, or compliance risks. Diversification is key—spread your vendor network across multiple regions to reduce dependency.
2. Limited Supplier Network (Lack of Sourcing Diversification)
If your vendor sources from only a few suppliers, their entire operation could be affected by:
- Sanctions impacting key suppliers
- Political instability in a supplier country
- Natural disasters or labour strikes
Encourage vendors to expand their supplier network to enhance their resilience—and protect your supply chain from unexpected disruptions.
3. Hidden Risks: Vendors That Lack Transparency
Trust is built on openness and communication. If a vendor is reluctant to share risk assessments, it’s a major red flag 🚩.
Questions to ask your vendors:
- Do you have a risk assessment plan?
- How do you mitigate geopolitical risks?
- Are you prepared for supply chain disruptions?
Lack of transparency can signal hidden vulnerabilities. Ensure your vendors conduct regular risk reviews and openly discuss potential threats.
4. Geopolitical Risk & Sanctions: Is Your Vendor Compliant?
Geopolitical risk in third-party vendors is often tied to compliance issues. Sanctions can cripple a vendor’s ability to operate—especially if they are based in sanction affected regions.
- Stay updated on geopolitical developments
- Regularly review vendor compliance
- Monitor supply chain restrictions
Ignoring sanction risks can lead to supply shortages, legal trouble, and financial losses. Make sure your vendors stay compliant with global regulations.
5. Political Instability: How It Can Disrupt Your Supply Chain
Government changes, civil unrest, or economic turmoil can throw supply chains into chaos.
🚨 Warning Signs of Political Risk:
- Elections with uncertain outcomes
- Trade restrictions & tariffs
- Civil unrest or labour strikes
Keeping an eye on political landscapes in key supplier regions allows you to prepare contingency plans—ensuring business continuity.
How to Protect Your Business from Third-Party Risks
What early warning signs have helped your business? How do you stay ahead of third-party risks?
- Do you use third-party screening services?
- Do you conduct regular vendor risk assessments?
Share your experiences in the comments below—your insights could help others navigate geopolitical risks more effectively.
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