Navigating Geopolitical Risks in Global Supply Chains: A Systematic Literature Review

Geopolitical risks have increased in frequency and magnitude of impact in recent years, disrupting the supply chains of multinational companies. We conducted a systematic literature review to examine suitable hedging strategies and essential prerequisites for geopolitical risk management and thus provide a holistic and contemporary overview of the current state of research on geopolitical risk hedging. Further, we develop a holistic geopolitical risk hedging framework. This paper contributes to the existing literature by providing a new definition of geopolitical risk based on five key characteristics. It further identifies and categorizes the available geopolitical risk hedging strategies and essential prerequisites proposed by academic scholars and management consultants. Most importantly, it develops a geopolitical risk hedging framework that introduces four categories of enablers, a standardized four-step geopolitical risk management approach, and three dimensions of hedging strategies. While no novel operational hedging strategies exclusively for geopolitical risk were identified, these well-known strategies were aligned with political and financial strategies, and their respective roles were redefined, combining them into a multidimensional and interconnected construct. Companies should follow the logic of vulnerability, resiliency and criticality: They should identify their individual areas of vulnerability and then assess the available levers for resiliency, which should be prioritized based on criticality. This paper finds that political risk management strategies play a fundamental role in geopolitical risk hedging, especially for protecting the areas with highest vulnerability. With these findings, this paper enhances both researchers' and managers' understanding of geopolitical risk. In particular, it provides guidance on the prerequisites and suitable strategies for effective geopolitical risk hedging in practice and proposes avenues for further analytical and empirically grounded research.