Proxima: How to Navigate Manufacturing Sourcing Risks

Understanding global sourcing risk is becoming increasingly critical for manufacturers looking to navigate shifting supply chains and geopolitical uncertainty. 

To provide clarity on this challenge, a new Global Sourcing Risk Index, developed by consulting firm Proxima in collaboration with Oxford Economics, assesses 20 leading economies and 10 fast-growing markets, covering 85% of global GDP and 65% of international trade. 

Taking a sweeping view across 10 sectors and eight dimensions of risk, the index maps out the challenges shaping modern industries today.

The eight key risk dimensions include geopolitical conflict, climate disruption, governance, human rights issues and supplier concentration. 

Within this context, the index aims to give manufacturing leaders clear insights into the country-sector combinations that come with higher risks and help them plan responses accordingly.

Balancing risk with cost

Mexico, Turkey and Russia are identified as the highest-risk sourcing destinations. 

These rankings reflect vulnerabilities including climate exposure, limited governance capacity and over-reliance on specific regions. 

European countries generally show lower risk levels, but this comes with much higher sourcing costs.

The results don’t mean companies are advised to avoid sourcing from high-risk countries altogether. Rather, they should understand the trade-offs involved – manufacturers must decide how much risk they are willing to take on in exchange for cost or market benefits.

Simon Geale, Executive Vice President at Proxima, explains: "This really is key. There is risk in every relationship and a company’s risk appetite will dictate just how much of that risk they are prepared to take for the price paid or relationship put in place.

"Generally speaking managing risk out gets incrementally more expensive and not all companies have the economic means to support this. Margins could be too low to take on this cost internally, or customers might have a ceiling price which means it can't be passed on, or both."

Simon breaks down the decision-making process into three steps. First, businesses need to understand potential risks in a location. Second, they must align their balance of risk, cost and reward. 

Finally, they can begin implementing mitigation strategies. These might include changes in policy, use of technology, new processes, innovation or cost optimisation.

New forces reshaping global business

The index identifies five pressures reshaping the sourcing landscape. These include the growing shift towards geopolitically aligned trade, known as ‘reorientation’.

The US, for example, now imports more from Mexico than from China, showing how nearshoring and friendshoring are influencing procurement. Other beneficiaries of this change include Poland, Turkey, India, Colombia, Brazil and Southeast Asian nations.

"What's really interesting for US procurement leaders are the complexities that sit behind their global sourcing decisions," says Simon. 

He adds that, while the US scores well in areas such as geopolitical conflict risk and climate adaptability, it still faces challenges in sectors heavily reliant on manual labour: "This has been particularly hit since COVID-19, and challenges here will be exacerbated by immigration reduction, onshoring and reindustrialisation. Buying domestically needs to factor these risks in and consider mitigating factors."

Mexico, despite topping the index’s overall risk score, remains the US’s biggest trade partner. Simon notes that “this does not mean do not buy from Mexico, far from it, it means understand the trade-offs and factor them into your commercial strategy and decisioning."

Reindustrialisation is also on the rise. Strategic onshoring is gaining attention, particularly in high-value sectors. 

Investment in this area is set to reach US$4.7tn in 2025, up from US$3.4tn in 2024. Most executives now view reindustrialisation as more important than short-term profit.

Digitisation is accelerating across supply chains, with tools like AI, automation and digital twins enabling real-time risk monitoring and smarter sourcing choices. 

Sustainability is another growing focus. According to a global survey from 2024, 70% of companies now prioritise environmental goals when selecting suppliers. However, while Europe enforces robust legislation, the US shows mixed progress.

Lastly, resilience is now a priority, replacing the former focus on cutting costs. Companies are beginning to measure value through predictability and strategic control rather than just bottom-line savings.

Trade realignment, not retreat

Globalisation may be slowing, with international trade as a share of global GDP levelling off, but interdependence between nations and markets remains strong. 

Every major region continues to depend on imports for at least 25% of its essential materials, goods or services. Both the International Monetary Fund and the World Trade Organisation still expect steady year-on-year growth in trade, indicating realignment and not retreat.

Simon highlights several key lessons from the index: "At an aggregate level the top five countries in the index are Mexico, Turkey, the Philippines, India and Russia. Russia aside, these four are key beneficiaries of the current and expected reorientation of supply chains, a lot of investment is going into them.

"The global sourcing risk index tells us that while they may have huge economic advantages, they are definitely not without risk,” he adds. “If we are trading one set of risks for another, we must understand why this is the right course of action, something we can do through strategy and sourcing. Reports suggest that a majority of CEOs are now looking to embed greater resilience at the expense of short-term profitability."

Simon concludes by urging leaders to think carefully about who their supply chain partners are: "When we talk about reducing reliance on more risky locations, who is your plus-one? When we talk about friendshoring, who is your friend? Leaders should recognise that there is risk in every supply decision and seek to understand what those risks are, and if further strategies are required to sit alongside new or existing supply arrangements.

"We have always been aware of risk as part of sourcing decisions, but as the world becomes more volatile, it should get greater consideration in strategic conversations around supply."

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