Global Business Environment and Geopolitics

Introduction

Global business is conducted within an environment shaped not only by markets and managerial choices but also by states, international institutions, political conflict, social expectations, technology and ecological pressures. A firm may possess a strong product and efficient operations yet suffer serious losses because of a tariff, sanctions, civil unrest, exchange restrictions, export controls, war or a sudden breakdown in a critical supply chain.

Globalization has therefore not eliminated geography or politics. Instead, it has connected national economies so closely that political decisions in one location can affect production, finance, employment and consumers elsewhere. Contemporary international business is characterized by both integration and fragmentation: firms operate across borders, while governments increasingly seek strategic autonomy, economic security and control over critical technologies.

For managers, the central task is not to predict every geopolitical event. It is to understand the institutions and forces that shape international exchange, identify vulnerabilities, assess alternative scenarios and design resilient, ethical and legally compliant strategies.

Learning Objectives

After studying this chapter, learners should be able to:

1. Explain globalization and distinguish its economic, political, technological and social dimensions.
2. Analyze the roles of the WTO, IMF, World Bank and regional integration arrangements.
3. Compare trade, investment and multinational-enterprise strategies.
4. Evaluate global supply-chain dependence, resilience and geopolitical exposure.
5. Explain sanctions, protectionism, export controls and investment screening.
6. Apply frameworks for assessing country and geopolitical risk.
7. Recommend strategic and ethical responses to international uncertainty.

1. Globalization: Meaning, Drivers and Tensions

Globalization is the intensification of cross-border flows of goods, services, capital, technology, information, people and organizational knowledge. It is not a single process. Economic globalization concerns production and markets; political globalization concerns international institutions and agreements; technological globalization concerns digital connectivity and the diffusion of innovation; and cultural globalization concerns the circulation and adaptation of values, symbols and consumption patterns.

Several forces have accelerated globalization:

• reductions in transport and communication costs;
• trade and investment liberalization;
• containerization and standardized logistics;
• digital platforms and cloud infrastructure;
• international financial markets;
• global managerial knowledge and common technical standards;
• the growth of emerging-market consumers and producers.

Globalization creates benefits through specialization, larger markets, knowledge transfer, competition and access to capital. Consumers may obtain greater variety and lower prices, while firms can locate activities where skills, resources or infrastructure are most suitable. However, benefits are unevenly distributed. Regions dependent on declining industries may experience unemployment, and gains from trade can coexist with labor exploitation, environmental damage and rising inequality.

A useful distinction is between global integration and local responsiveness. Global integration seeks scale, standardization and coordinated operations. Local responsiveness adapts products, employment practices, marketing and governance to national conditions. A multinational enterprise must decide which activities can be standardized and which must be localized. Excessive standardization can create cultural and regulatory failure; excessive localization can eliminate economies of scale.

Competing interpretations of globalization

Liberal perspectives emphasize mutual gains from trade, institutional cooperation and interdependence. Critical perspectives argue that globalization may reproduce unequal bargaining power between capital-rich firms and labor-intensive economies. Strategic-trade perspectives emphasize that governments may support national champions, subsidize industries or restrict foreign competitors. These perspectives are not mutually exclusive: international exchange can create aggregate gains while distributing those gains unequally.

Globalization also produces a tension between efficiency and resilience. A highly concentrated supply chain may minimize cost under stable conditions but become fragile during a pandemic, conflict or trade dispute. Resilience requires capabilities such as visibility, redundancy, flexibility and rapid recovery, all of which may increase short-term cost.

2. The Institutional Architecture of the Global Economy

International business is governed by overlapping national, regional and global institutions. These institutions do not create a world government; rather, they provide rules, financing, coordination and dispute-management mechanisms.

World Trade Organization

The World Trade Organization (WTO) provides a framework for trade in goods, services and intellectual property. Its principles include most-favoured-nation treatment, national treatment, transparency and negotiated tariff commitments. Most-favoured-nation treatment generally requires a member to extend a trade advantage to all WTO members, subject to recognized exceptions. National treatment generally requires imported products, after entry, to receive treatment comparable to domestic products.

The WTO system permits exceptions for objectives such as public health, national security and environmental protection, but such exceptions are not unlimited. Their interpretation can generate legal and political controversy. The WTO's dispute-settlement system has historically supported rule-based trade, although institutional disagreements have reduced the effectiveness of appellate review in recent years.

International Monetary Fund

The International Monetary Fund (IMF) promotes international monetary cooperation, monitors economic conditions and provides financial assistance to countries facing balance-of-payments problems. IMF programs commonly involve policy conditions intended to restore external viability and debt sustainability. Such programs can stabilize economies but may impose difficult fiscal or structural adjustments and can generate debate about sovereignty, social costs and the distribution of adjustment burdens.

World Bank Group

The World Bank Group supports development through loans, grants, technical assistance and policy advice. Its activities include infrastructure, health, education, institutional reform and private-sector development. Projects increasingly address climate adaptation, digital inclusion and sustainable development, although major development finance can raise questions about debt, displacement, procurement and environmental safeguards.

Other influential institutions and regimes

The United Nations and its agencies shape peace, development, human rights and humanitarian standards. The Bank for International Settlements supports cooperation among central banks. The Organisation for Economic Co-operation and Development develops policy standards and tax-cooperation initiatives. The Financial Action Task Force establishes recommendations concerning money laundering and terrorist financing. International arbitration institutions help resolve commercial disputes.

These bodies interact with national regulators, courts, stock exchanges, standards organizations and private certification systems. Managers must therefore treat compliance as a networked responsibility rather than as a single legal checklist.

3. Trade Regimes and Policy Instruments

International trade may be restricted or facilitated through several instruments.

A tariff creates a wedge between the world price and the domestic price. Its effects depend on market power, elasticity, exchange rates and the capacity of domestic firms. Consumers generally face higher prices, while protected producers may gain. Government receives tariff revenue, but the economy may suffer efficiency losses. Retaliatory measures can reduce exports and intensify political conflict.

Trade policy increasingly reflects economic security. Governments may restrict semiconductors, advanced computing, telecommunications infrastructure, energy technologies, dual-use goods and strategic minerals. The stated objectives may include national security, supply-chain resilience, human-rights protection or climate policy. The managerial challenge is distinguishing legitimate compliance obligations from commercial uncertainty and anticipating extraterritorial consequences.

4. Foreign Direct Investment and Multinational Enterprises

Foreign direct investment (FDI) occurs when an investor seeks a lasting interest and a meaningful degree of influence in an enterprise located in another country. FDI differs from portfolio investment, which generally involves financial ownership without operational control.

Multinational enterprises (MNEs) coordinate activities across multiple jurisdictions. Their motives include access to markets, natural resources, skills, technology, efficiency and strategic assets. Common entry modes include exporting, licensing, franchising, contractual alliances, joint ventures, acquisitions and wholly owned subsidiaries.

The OLI framework

The eclectic or OLI framework explains FDI through three advantages:

• Ownership advantages (O): proprietary technology, brands, managerial capabilities, data, patents or organizational routines.
• Location advantages (L): market size, labor skills, infrastructure, resources, institutions, tax conditions or geographic position.
• Internalization advantages (I): benefits of controlling a transaction within the firm rather than relying on a market contract.

FDI is more likely when a firm possesses transferable ownership advantages, a foreign location offers relevant benefits, and internal control is more efficient or safer than licensing or outsourcing. The framework is useful but not mechanically predictive. Political risk, institutional quality, learning objectives and strategic competition can influence decisions even when immediate cost advantages are weak.

MNE strategies and governance

A global strategy standardizes products and processes to achieve scale. A multidomestic strategy gives subsidiaries considerable autonomy to respond to local markets. A transnational strategy seeks simultaneous efficiency, local responsiveness and worldwide learning. In practice, firms often use hybrid arrangements.

MNEs can contribute capital, skills, employment and technology, but they may also engage in regulatory arbitrage, shift profits, weaken labor bargaining power or create environmental externalities. Responsible MNE governance requires tax integrity, human-rights due diligence, anti-corruption controls, environmental management and meaningful stakeholder engagement.

5. Regional Economic Integration

Regional integration involves agreements through which states reduce barriers and coordinate economic policies. Its principal forms are:

1. Preferential trade arrangement: selected tariff preferences.
2. Free-trade area: members remove many internal trade barriers but retain separate external tariffs.
3. Customs union: free internal trade plus a common external tariff.
4. Common market: customs union plus freer movement of factors such as capital and labor.
5. Economic union: common market plus coordination or unification of important economic policies.
6. Monetary union: adoption of a common currency or common monetary authority.

Integration can create trade creation, in which lower-cost member production replaces higher-cost domestic production. It can also create trade diversion, in which imports shift from a more efficient non-member to a less efficient member because of preferential treatment. Regional arrangements may improve bargaining power and regulatory coordination but can also produce complex rules of origin, overlapping obligations and political tensions.

Managers must examine tariff schedules, customs procedures, origin rules, standards, labor mobility, data-transfer requirements and dispute mechanisms rather than treating a regional agreement as a simple tariff reduction.

6. Global Supply Chains and Strategic Dependence

A global supply chain links suppliers, manufacturers, logistics providers, distributors, platforms and customers across jurisdictions. Its performance depends on cost, quality, speed, flexibility, visibility and resilience.

Supply-chain risk may arise from:

• single-source or single-country dependence;
• port, canal, rail or energy infrastructure disruption;
• sanctions and export controls;
• cyberattacks and data compromise;
• climate events and water scarcity;
• labor disputes and social unrest;
• supplier insolvency;
• weak traceability or forced-labor exposure.

A useful risk expression for prioritization is:

Probability is expressed between 0 and 1, and financial impact is measured in a stated currency over a defined period. The expression is a prioritization tool, not a precise forecast. It assumes that probability and impact can be estimated consistently and does not fully capture cascading effects, non-financial harm or uncertainty about the probability itself.

For example, if a disruption has an estimated probability of 0.20 in one year and would cause a loss of $5 million, the estimated expected loss is $1 million. A second risk with probability 0.05 and impact of $30 million has an expected loss of $1.5 million and may deserve greater attention despite its lower probability.

Resilience measures include dual sourcing, supplier development, strategic inventory, modular product design, regional manufacturing, alternative logistics routes, cyber controls, contractual rights to information and regular stress testing. However, redundancy is not automatically efficient. Multiple suppliers may increase cost, reduce volume discounts and create quality variation. The appropriate objective is not maximum inventory or complete self-sufficiency, but economically justified resilience for critical inputs.

7. Geopolitical Risk, Sanctions and Protectionism

Geopolitical risk is the possibility that political competition, conflict or state action will adversely affect business conditions. It may be country-specific, bilateral, regional or systemic. Examples include war, diplomatic breakdown, regime change, expropriation, civil disorder, maritime insecurity and sudden regulatory intervention.

Risk should be distinguished from uncertainty. Risk refers to situations in which probabilities can be estimated with some confidence; uncertainty concerns outcomes whose probabilities are poorly known. Geopolitical events often combine both.

A practical risk-assessment framework

Managers can assess geopolitical exposure through five questions:

1. Exposure: Which assets, people, revenues, data, suppliers and customers are located in or connected to the affected jurisdiction?
2. Transmission: Through what channels could disruption spread—trade, finance, logistics, energy, technology, reputation or regulation?
3. Severity: What are the operational, financial, legal, human and ethical consequences?
4. Time horizon: Would the effect be temporary, persistent or structurally transformative?
5. Response options: Can the firm avoid, reduce, transfer, share or accept the exposure?

Scenario planning is more useful than a single forecast. A firm may examine a baseline scenario, an escalation scenario and a de-escalation or recovery scenario. Each scenario should identify early-warning indicators, decision triggers, responsible executives and feasible actions.

Sanctions

Sanctions are restrictive measures imposed by states or international bodies to influence governments, organizations or individuals. They may include asset freezes, travel bans, arms restrictions, financial prohibitions, trade bans, sectoral restrictions and technology controls.

Sanctions compliance requires screening customers, suppliers, beneficial owners, banks, vessels and transactions; understanding jurisdictional reach; controlling re-exports; maintaining records; and escalating potential matches. A company must not assume that a transaction is lawful merely because the counterparty is not directly listed. Sectoral and secondary sanctions, ownership rules and controlled technologies can create indirect exposure.

Ethically, sanctions raise difficult questions. They may pressure governments while harming civilians, especially when essential goods or financial channels are affected. Firms should comply with applicable law, avoid evasion, implement humanitarian safeguards where legally permitted and communicate transparently with affected stakeholders.

Protectionism

Protectionism is the use of state measures to shelter domestic economic activity from foreign competition. It may protect employment or strategic capability, but persistent protection can reduce productivity, raise consumer prices and invite retaliation. Modern protectionism may appear as tariffs, subsidies, procurement preferences, investment screening, data localization, technical standards or industrial policy rather than as explicit import bans.

8. Ethics, Sustainability and Governance in Global Business

Global operations create ethical responsibilities that extend beyond formal legal compliance. A practice may be legal in a host country but inconsistent with widely accepted principles of human dignity, safety or environmental stewardship.

Key issues include:

• forced labor, child labor and unsafe working conditions;
• discrimination and suppression of worker voice;
• bribery and facilitation payments;
• tax avoidance and opaque ownership structures;
• land acquisition, displacement and indigenous rights;
• emissions, pollution and biodiversity loss;
• misuse of personal data and surveillance technology;
• corruption in public procurement;
• misleading sustainability claims.

A robust governance system combines board oversight, risk-based due diligence, supplier standards, independent audits, grievance mechanisms, whistle-blower protection, remediation and public reporting. Audits alone are insufficient: announced inspections may miss abuse, and suppliers may conceal conditions. Effective due diligence examines purchasing practices, worker interviews, recruitment fees, subcontracting and the firm's own contribution to harmful incentives.

The UN Guiding Principles on Business and Human Rights, OECD responsible-business guidance and international labor standards provide important reference points. Firms should also understand mandatory national regimes concerning modern slavery, environmental disclosure, data protection, anti-bribery and supply-chain due diligence.

9. Technology, Data and the Changing Global Environment

Digital technologies reshape international business by enabling remote services, algorithmic coordination, digital payments and real-time monitoring. They also create geopolitical dependencies involving cloud providers, undersea cables, satellite systems, semiconductor supply and data centers.

Artificial intelligence can improve demand forecasting, supplier monitoring, translation, fraud detection and scenario analysis. Yet AI systems may amplify biased data, expose confidential information, produce unreliable predictions or violate privacy and export-control rules. Managers should establish human accountability, data governance, model documentation, access controls, testing and escalation procedures.

Data localization and cross-border transfer rules can require firms to redesign information systems. Cybersecurity is simultaneously an operational, legal and national-security issue. A global firm should identify critical information assets, segment networks, maintain incident-response plans, test backups and assess third-party cyber risk.

10. Illustrative Case: A Semiconductor Firm Under Geopolitical Pressure

Background

A fictional company, Meridian Microdevices, designs industrial chips and outsources fabrication to suppliers in two Asian economies. It sells to automotive, medical-equipment and telecommunications customers. Its strategy has historically emphasized low unit cost and just-in-time inventory.

Problem

A deterioration in relations between two major powers leads to new export controls on advanced chipmaking equipment and selected computing technologies. One fabrication partner becomes subject to additional licensing requirements. At the same time, a shipping disruption raises transit times and insurance costs. Meridian must protect customers without violating sanctions or export-control law.

Analysis

Meridian maps its exposure across five layers: technology specifications, supplier ownership, manufacturing location, logistics routes and customer end use. It discovers that a component previously treated as ordinary hardware incorporates controlled design software. It also finds that its second supplier depends on equipment maintenance from a restricted jurisdiction. The firm therefore faces legal exposure that is not visible from the immediate sales contract.

The executive committee develops three scenarios: controls remain stable; controls expand to related technologies; and regional conflict causes severe logistics disruption. For each scenario, it estimates revenue at risk, customer criticality, lead-time effects, compliance requirements and available substitutes. It avoids treating probability estimates as certainty and uses trigger events—new regulations, license denials, shipping alerts and supplier ownership changes—to update decisions.

Approach and solution

Meridian creates a cross-functional geopolitical-risk committee involving legal, procurement, engineering, finance, compliance, cybersecurity and operations. It adopts the following measures:

• classifies products by technical characteristics and end use;
• screens parties and beneficial owners;
• obtains specialist advice on export-control jurisdiction;
• qualifies a second fabrication route outside the immediate risk area;
• redesigns selected products to use less constrained components;
• holds a targeted buffer inventory for medical customers;
• inserts audit, information-sharing and termination clauses into supplier contracts;
• communicates realistic lead times to customers;
• prohibits circumvention through intermediaries;
• establishes a board-level reporting dashboard.

Outcome

The measures increase cost in the short term, but Meridian avoids an unlawful shipment, maintains supply to critical medical customers and reduces dependence on a single manufacturing corridor. It does not achieve complete de-risking; instead, it develops controlled diversification and better visibility.

Learning points

First, geopolitical risk is embedded in product design, ownership, software, logistics and customer use—not merely in the location of a factory. Second, compliance must be integrated with strategy rather than treated as a final transaction check. Third, resilience requires trade-offs: redundancy and inventory cost money, but the cost of failure may be greater. Finally, ethical decisions should consider essential customers, workers and communities, not only shareholder returns.

11. Managerial Best Practices

Effective global-environment management includes the following practices:

1. Maintain a current map of jurisdictions, counterparties, technologies and critical dependencies.
2. Use cross-functional governance rather than leaving geopolitical issues solely to legal staff.
3. Track regulatory changes through reliable official sources and specialist expertise.
4. Segment suppliers and products according to criticality and substitutability.
5. Conduct scenario analysis and define explicit escalation thresholds.
6. Build contractual rights to information, audit and remediation.
7. Combine efficiency with selective redundancy and regional alternatives.
8. Protect whistle-blowers and provide credible grievance channels.
9. Integrate human-rights and environmental due diligence into procurement.
10. Review decisions through both legal and ethical lenses.
11. Preserve documentation demonstrating reasonable compliance efforts.
12. Reassess strategy after major elections, conflicts, sanctions or regulatory changes.

Challenges and Limitations

Geopolitical analysis has inherent limitations. Information may be incomplete, politically biased or deliberately deceptive. Experts may disagree about probabilities, and events can develop faster than corporate decision cycles. Scenario planning can create false confidence if managers treat scenarios as forecasts. Diversification can also reproduce hidden common dependencies—for example, several suppliers may rely on the same upstream mineral, software library, port or energy system.

International institutions may lack enforcement power, and national laws may conflict. Ethical standards can be interpreted differently across cultures, but cultural difference does not justify coercion, discrimination or abuse. Finally, resilience investments may disadvantage smaller firms that lack capital and regulatory expertise. Responsible policy should therefore consider distributional effects across suppliers, workers and consumers.

Chapter Summary

Global business operates within an environment of simultaneous integration and geopolitical fragmentation. Globalization creates gains through specialization, market access, capital and knowledge, but also produces inequality, environmental pressures and systemic dependence. The WTO, IMF, World Bank and regional agreements provide rules and coordination, while national governments retain substantial power over trade, investment, technology and security.

Managers must understand tariffs, quotas, subsidies, export controls, sanctions, investment screening and regional integration. MNE strategy can be analyzed through ownership, location and internalization advantages. Global supply chains should be assessed for cost, visibility, resilience and concentration risk. Expected loss can support prioritization, but scenario analysis is essential when probabilities are uncertain.

Geopolitical competence combines legal compliance, strategic analysis, ethical judgment and operational preparedness. Effective firms map exposure, monitor early warnings, diversify selectively, protect human rights, govern data and technology responsibly, and maintain transparent stakeholder relationships. The objective is not complete insulation from global risk; it is informed, resilient and principled participation in the global economy.

Key Terms

Globalization: Intensification of cross-border flows of goods, services, capital, technology, information and people.

Global integration: Coordination and standardization of activities across countries to achieve scale and efficiency.

Local responsiveness: Adaptation of products, practices and governance to host-country conditions.

World Trade Organization: Institution providing a framework for international trade rules and negotiations.

International Monetary Fund: Institution supporting monetary cooperation, surveillance and balance-of-payments assistance.

Foreign direct investment: Cross-border investment involving a lasting interest and meaningful influence in a foreign enterprise.

Multinational enterprise: Firm that coordinates value-creating activities across multiple countries.

OLI framework: Framework explaining FDI through ownership, location and internalization advantages.

Regional integration: Cooperation among countries to reduce economic barriers and coordinate policies.

Tariff: Tax imposed on imported goods.

Quota: Quantitative restriction on imports or exports.

Protectionism: Government action intended to shelter domestic activity from foreign competition.

Export control: Restriction on transferring specified goods, technology, software or services.

Sanctions: Restrictive measures imposed to influence states, organizations or individuals.

Geopolitical risk: Potential adverse effect of political conflict or state action on business conditions.

Supply-chain resilience: Ability to prepare for, absorb, recover from and adapt to disruption.

Economic security: Protection of national strategic capabilities, technologies and essential supply.

Due diligence: Process of identifying, preventing, mitigating and accounting for adverse impacts.

Trade creation: Shift toward lower-cost production within an integrating region.

Trade diversion: Shift from a more efficient non-member supplier to a less efficient member supplier due to preferential treatment.

Review Questions

Short Answer Questions

1. Define globalization and identify four forces that have accelerated it.
2. Distinguish the WTO, IMF and World Bank by their principal functions.
3. What are ownership, location and internalization advantages in the OLI framework?
4. Explain the difference between a tariff and a quota.
5. Why can a globally integrated supply chain be efficient but fragile?

Long Answer Questions

1. Critically evaluate the benefits and costs of globalization for firms, workers, consumers and governments.
2. Explain the major forms of regional economic integration and discuss trade creation and trade diversion.
3. Analyze how sanctions and export controls affect multinational-enterprise strategy.
4. Discuss the ethical responsibilities of MNEs in global supply chains.
5. Explain how a firm can balance global integration with local responsiveness and resilience.

Analytical / Application Questions

1. A firm has one supplier with an estimated disruption probability of 0.20 and a potential annual loss of $5 million. A second risk has a probability of 0.05 and a potential loss of $30 million. Calculate the expected loss for each and recommend which risk deserves greater initial attention.
2. Design a geopolitical-risk dashboard for a company dependent on imported critical minerals. Specify at least six indicators and explain how management should respond to warning signals.
3. Using the Meridian Microdevices case, evaluate whether regional diversification, strategic inventory or product redesign is the strongest response. Justify your recommendation using cost, resilience, compliance and ethical criteria.

Multiple Choice Questions with Answers

Question 1

Which statement best describes the OLI framework for foreign direct investment?

A. It explains FDI through ownership, location and internalization advantages.

B. It measures only exchange-rate volatility and inflation.

C. It classifies countries according to tariff revenue.

D. It explains why firms must always export rather than invest abroad.

Correct Answer: A. It explains FDI through ownership, location and internalization advantages.

Question 2

Which institution primarily provides a framework for international trade rules and negotiations?

A. International Monetary Fund

B. World Trade Organization

C. World Bank

D. Bank for International Settlements

Correct Answer: B. World Trade Organization

Question 3

A tariff is best defined as:

A. A quantitative limit on imports

B. A tax imposed on imported goods

C. A subsidy paid to foreign consumers

D. A prohibition on foreign direct investment

Correct Answer: B. A tax imposed on imported goods

Question 4

Which situation illustrates trade diversion?

A. A country replaces expensive domestic production with cheaper imports from a regional partner.

B. A country shifts from a more efficient non-member supplier to a less efficient member supplier because of preferential treatment.

C. A firm increases exports after improving productivity.

D. A government removes all customs procedures.

Correct Answer: B. A country shifts from a more efficient non-member supplier to a less efficient member supplier because of preferential treatment.

Question 5

If a disruption has probability 0.20 and financial impact of $5 million, what is its expected loss?

A. $0.25 million

B. $1 million

C. $5.2 million

D. $25 million

Correct Answer: B. $1 million

Question 6

Which measure most directly improves supply-chain resilience?

A. Relying exclusively on the lowest-cost supplier

B. Removing supplier information from management reports

C. Qualifying alternative suppliers for critical inputs

D. Eliminating all inventory regardless of product criticality

Correct Answer: C. Qualifying alternative suppliers for critical inputs

Question 7

Why can sanctions create indirect exposure for a firm?

A. Only listed individuals can be affected by sanctions.

B. Sectoral restrictions, ownership rules and re-export controls may affect connected transactions.

C. Sanctions apply only to domestic sales.

D. Sanctions automatically increase market access.

Correct Answer: B. Sectoral restrictions, ownership rules and re-export controls may affect connected transactions.

Question 8

Which is an example of local responsiveness?

A. Using an identical product and marketing campaign worldwide

B. Adapting a product to local regulations and consumer preferences

C. Centralizing every decision at headquarters

D. Using one global supplier for every market

Correct Answer: B. Adapting a product to local regulations and consumer preferences

Question 9

Which statement best reflects an ethical approach to global supply-chain due diligence?

A. Legal compliance is always sufficient, regardless of human-rights impacts.

B. A one-time announced audit eliminates all supplier risk.

C. Firms should identify, prevent, mitigate and remediate adverse impacts.

D. Only first-tier suppliers matter.

Correct Answer: C. Firms should identify, prevent, mitigate and remediate adverse impacts.

Question 10

What is the most appropriate purpose of scenario planning in geopolitical risk management?

A. To guarantee an accurate prediction of political events

B. To replace legal compliance with managerial intuition

C. To examine alternative futures, triggers and response options

D. To eliminate the need for supply-chain data

Correct Answer: C. To examine alternative futures, triggers and response options