For much of the past three decades, global supply chains were built for efficiency rather than resilience. Companies concentrated sourcing in a limited number of regions to reduce cost and maximize scale.
That environment is changing.
Tariffs, industrial policy, and geopolitical competition are reshaping global trade flows and forcing companies to rethink long-standing sourcing strategies. What were once background considerations now directly influence margins, capital allocation, growth planning, and ultimately enterprise value.
I was recently discussing this shift with Jay Collins, Vice Chairman of Banking and Public Sector at Citi, who has spent more than three decades advising heads of state, central banks, and CEOs through periods of financial crisis, sovereign restructurings, geopolitical instability, and technological disruption. Collins has also led Citi’s global infrastructure finance efforts and advised governments on climate finance, energy transition, and large-scale development initiatives. One of his core observations is that issues once considered separate—finance, technology, national security, energy, and industrial policy—are now fully interconnected. In his words, “everything is geopolitical.”
For private equity investors, that reality is increasingly influencing both deal underwriting and value creation.
According to McKinsey, 82% of companies report that tariffs are affecting their supply chains, with as much as 20–40% of global supply chain activity exposed to trade policy changes. At the same time, trade policy has become increasingly fragmented. Global Trade Alert data shows that more than 4,000 trade-restrictive interventions are now being implemented annually, creating a materially more complex operating environment for globally integrated businesses.
As a result, supply chain strategy is no longer simply an operational issue. Decisions around sourcing, procurement, manufacturing footprint, and supplier diversification increasingly influence working capital, pricing strategy, growth initiatives, and exit outcomes.
This shift is also exposing a broader leadership and governance gap.
Much has been written about the lack of cybersecurity and AI expertise in today’s boardrooms. Yet many PE-backed companies face an equally significant shortage of directors and executives with meaningful experience navigating geopolitical risk, industrial policy, trade fragmentation, and global supply chains.
For investors, this matters because geopolitical developments now have the potential to affect margins, customer commitments, inventory levels, capital allocation decisions, and enterprise value creation with remarkable speed. Management teams and boards that lack this perspective may struggle to identify risks—or opportunities—before competitors do.
A recent Kestrel Bay client, Power & Data Management (PDM), an electrical infrastructure company founded by two former GE executives, illustrates this dynamic.
PDM faced the same transformer shortages affecting much of the industry, with procurement timelines extending to 18–24 months. Rather than relying solely on traditional domestic suppliers, the company developed direct sourcing relationships with manufacturers in China, leveraging leadership with deep international experience and language capabilities.
The result was a dramatic shift in performance. Procurement timelines were reduced to approximately nine weeks, enabling faster project execution and supporting meteoric growth during a period when many competitors continued to face significant supply constraints.
This example underscores a broader point: in a more fragmented global economy, leadership capability can become a competitive advantage.
We are increasingly seeing three capabilities emerge as critical across private equity portfolio companies:
- Operational Resilience: The ability to redesign supply chains through diversified supplier networks and multi-region sourcing strategies.
- Financial Agility: The ability to model tariff exposure, manage cost volatility, and adapt pricing strategies accordingly.
- Global Operating Experience: The ability to navigate international sourcing markets, geopolitical complexity, and evolving regulatory environments.
As supply chains continue to evolve, these capabilities are moving from “nice to have” to essential.
For investors, the question is no longer simply whether a company has supplier concentration risk. It is whether management teams and boards possess the experience and judgment required to adapt as geopolitical and trade dynamics shift.
The firms that incorporate these considerations into both leadership planning and board composition will be better positioned not only to manage risk, but to create competitive advantage in an increasingly fragmented global landscape.