Derisking and friendshoring won’t get governments supply chain security. Putting their economic house in order will

Derisking and friendshoring won’t get governments supply chain security. Putting their economic house in order will

De-risking is the focus at the World Economic Forum in Davos, with leaders warning of overdependence on global supply chains. Policymakers aim for self-reliance in the global value chain amidst geopolitical tensions. However, tech export controls on China are deemed counterproductive, while state subsidies distort international competition. The key lies in building resilience through innovation and export diversification, as demonstrated by the Supply Chain Resilience Initiative involving Japan, India, Australia, and potentially the United States.

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FAQ: De-risking and Friendshoring for Government Supply Chain Security

Frequently Asked Questions

Q1: What is de-risking in the context of supply chain security?

A1: De-risking refers to the process by which governments or companies take steps to reduce the vulnerabilities and risks within their supply chains. This can include diversifying suppliers, increasing stockpiles, or implementing more stringent monitoring of supply chain activities.

Q2: What does friendshoring mean?

A2: Friendshoring is the practice of moving supply chains to countries that are considered political or economic allies. The idea is to rely on partners with shared interests for critical components and materials, which is believed to reduce the risks associated with geopolitical tensions.

Q3: Why might de-risking and friendshoring not ensure supply chain security?

A3: While these methods can mitigate certain risks, they do not address the underlying economic challenges that may be present. For example, if a country's economic foundations are unstable or if there are significant financial imbalances, merely reconfiguring supply chains may not be sufficient for long-term security.

Q4: How can putting their economic house in order help governments with supply chain security?

A4: By strengthening domestic economic policies, improving fiscal health, investing in critical infrastructure, and nurturing a skilled workforce, governments can create a more resilient economic environment. In such a setting, supply chains are better supported by strong internal markets and robust industrial bases, which can help buffer against external shocks.

Q5: Are there examples of countries that are successfully putting their economics house in order to secure their supply chains?

A5: The specific articles and reports provided do not mention particular countries that are exemplars in this approach. However, the principle suggests that countries with strong economic policies, resilience to global shocks, and sustainable debt levels are likely better positioned to secure their supply chains.

For further details on why de-risking and friendshoring may not be sufficient for supply chain security and the importance of sound economic foundations, please refer to the Fortune article.