Mothersole argues that this seemingly illogical correlation comes "from a fundamental mispricing of risk." He suggests companies use a more nuanced estimation of country-based cost and risk according to three factors: enforceability of private contracts, losses due to corruption, and losses due to crime. This more all-encompassing approach, somewhat similar in concept to the Reshoring Initiative's TCO Estimator, suggests that lower-risk companies are in fact lower-cost countries for supply chain choices.
For example, in the chart below, you can see that some higher cost countries, such as the U.S. and Japan, actually have much lower risk factors and therefore lower sourcing scores, metrics which provide a single measurement combining risk and price.
For more on the risks of offshoring, see our recent blog post on IP risk and cost in offshoring.