Geopolitics and the governance of global economies

ESCP Observatory

Roberto Tubaldi, ESCP Business School: “Resilient governance of global supply chains helps to safeguard competitiveness”

In complex times such as these, amidst geopolitical tensions and conflicts such as those in the Middle East and Ukraine, according to Roberto Tubaldi, Assistant Professor of Finance at ESCP Business School’s Turin campus, a ‘more diversified, more transparent’ supply chain is essential for ‘reducing the volatility of input costs and the likelihood of rationing during periods of stress’

by Giorgia Colucci

29 May 2026

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5' min read

Translated by AI

Versione italiana

5' min read

Translated by AI

Versione italiana

(Il Sole 24 Ore Radiocor) - Supply chains have taken on an increasingly central role in recent years. Indeed, ‘globalisation has enabled the creation of long, specialised value chains capable of reducing costs and sustaining higher margins’. However, the conflicts in the Middle East and Ukraine, geopolitical tensions and the Covid-19 pandemic “have highlighted the hidden costs of these structures” and the need to take action to improve and strengthen them. This is explained in an interview with Radiocor by Roberto Tubaldi, Assistant Professor of Finance at ESCP Business School on the Turin campus, who argues that a ‘more resilient, more diversified, more transparent’ supply chain is essential for ‘reducing the variability of input costs and the likelihood of rationing during periods of stress’.

Furthermore, shocks in supply chains have a significant impact on the industrial structure, as illustrated by the research Supply Chain Shortages, Large Firms’ Market Power, and Inflation – on which Tubaldi is collaborating with Francesco Franzoni of USI Lugano and the Swiss Finance Institute, and Mariassunta Giannetti of the Stockholm School of Economics. Suffice it to say that, following a supply chain shortage in 2021, larger firms gained a competitive advantage thanks to their diversified supplier networks and greater bargaining power. And the effects are long-lasting: the market share gains made by firms that manage to continue serving their customers during periods of scarcity are largely permanent, whilst pressure on margins eases once supply returns to normal – explains the expert. A robust supply chain therefore protects not only short-term financial results but also long-term competitive position.

Roberto Tubaldi, Assistant Professor of Finance dell’ESCP Business School presso il campus di Torino

Supply chains at the heart of governance

However, disruptions to the supply chain do not merely have operational implications. “Decisions regarding supply chain configuration — vertical integration, diversification of sources, and the level of strategic stock — profoundly alter exposure to operational risk and, consequently, the cost of capital and enterprise value,” explains Tubaldi. Therefore, they should be assessed by boards of directors with ‘the same rigour as that applied to investments in fixed assets’. Added to this is regulatory pressure. ‘The European Corporate Sustainability Reporting Directive (2022) introduces the principle of double materiality, which obliges large companies to report not only on their own environmental and social impacts, but also on how vulnerabilities in the supply chain create measurable financial risks for the company itself’, states the Professor.

Furthermore, supply chain governance is not merely a reputational issue, but a genuine fiduciary obligation. In fact, “institutional investors increasingly view a company’s ability to manage its supply chain as a direct indicator of the quality of its risk management, with implications for the required premium and the cost of capital”, states Tubaldi. Redundancy and diversification are no longer inefficiencies to be minimised, but recognised components of corporate value.

Disruptions create asymmetries

To fully understand the importance of supply chains and any potential issues, however, we need to take a step back and look at the most critical moments – and the imbalances – that disruptions create within the market. ‘When a supplier is unable to meet the full demand, they must necessarily decide whom to serve and whom to ration,’ explains Tubaldi. ‘The logic behind this decision is not random.’ As revealed by the study conducted by the Professor with his colleagues Franzoni and Giannetti – an analysis based on millions of sea shipments to US customers and on the mapping of customer-supplier relationships in over seventy countries – during periods of scarcity, suppliers systematically prioritise the customers who account for the largest share of their revenue. These are not necessarily the largest ‘in absolute terms’, the expert emphasises, but those with a greater relative weight within the supplier’s customer portfolio.

The reason is primarily relational in nature: ‘losing an important customer destroys a value of continuity far greater than that associated with the loss of a marginal customer’. This choice, whilst necessary, does, however, have consequences. Indeed, ‘those who are “important” customers of their supplier experience a smaller increase in costs, maintain or increase their market share and, in sectors with less elastic demand, are able to raise their selling prices’. Added to this are other factors that enable larger firms to weather crises more effectively. “Firstly, diversifying one’s supplier base reduces dependence on a single point of failure,” states Tubaldi. Furthermore, larger companies have ‘the capacity to absorb safety stocks – inventories, long-term contracts, reserved capacity agreements – and to withstand temporary price rises thanks to easier access to credit’. Finally, “vertical integration and economies of scope make it possible to internalise certain links in the supply chain or to substitute inputs between divisions”.

A change in circumstances

This trend has been observed over the past five years. In addition to a significant increase in market share and profitability, the companies deemed most important by their suppliers have recorded “measurable premiums compared with competitors in the same sector” on the stock market as well. Furthermore, ‘in the most concentrated sectors, supply chain pressures have generated inflationary pressures almost 40 per cent more intense than in others’, explains Tubaldi. Looking at the economy as a whole, ‘the mechanism of favouritism within supply chains accounts for around a fifth of consumer inflation in the United States in 2021 — a far from negligible contribution to the rising costs experienced by American households that year’. It is precisely against the backdrop of these figures that the debate on so-called greedflation must be understood.

In fact, as Tubaldi points out, greed ‘is not an operational category. Capitalist firms always maximise their margins in accordance with market conditions’. What fuelled the inflation of 2021–2022 was therefore not ‘a change in preferences’, but a ‘change in market conditions’ which, albeit temporarily, conferred pricing power on those able to secure supplies. In this case, ‘smaller competitors – more exposed to rationing, less protected by long-term relationships with suppliers – were temporarily sidelined’. It was precisely this that left ‘“important” customers’ free to raise prices without fear of losing market share’. It must also be borne in mind that, even when bottlenecks are resolved, competition resumes and profit margins return to normal, ‘the market share gained remains’.

The implications for economic policy

‘In terms of monetary policy, if the dominant mechanism behind supply-chain inflationary pressures is suppliers’ favouritism towards larger customers, aggressive monetary tightening may produce undesirable side effects.’ Put simply, high interest rates make the financial constraints on smaller firms more severe, risking a further reduction in competition – which would otherwise squeeze profit margins – and exacerbating the asymmetries that fuel price rises. ‘This does not mean that the central bank should stand still,’ says the professor, ‘but that, in the presence of supply-chain shocks, the effectiveness of a tightening is lower than that which would be observed in the face of demand shocks, and its distributional effects on the industrial structure must be carefully assessed.’

In any case, to curb the inflation linked to supply chain pressures, it is essential to ‘remove bottlenecks’, through ‘investment in port capacity and intermodal logistics, or programmes to rebuild stocks of critical inputs, from semiconductors to active pharmaceutical ingredients’, says the expert. Furthermore, economic policymakers should bear in mind that ‘supply chain shocks tend to permanently increase industrial concentration; market shares gained during periods of scarcity remain even after supplies have normalised’.