The Global Value Chain, Corporate Compliance & Managing New Legal Risk

In recent years, policymakers and researchers across various disciplines have focused on mapping the contours of the contemporary global value chain (GVC). This paper examines the value of networks and related concepts, such as network failures, as lenses through which the GVC can be better understood, particularly in addressing human rights and environmental issues. Modern legal frameworks find it challenging to integrate these globally extended, network-like business structures within the bounds of traditional legal paradigms. The resulting regulatory landscape has, therefore, evolved into a complex mosaic of public and private norms and standards, creating nebulous and uncertain legal risks and responsibilities across the GVC. This ongoing shift places the management of this complex, multi-dimensional legal risk and the compliance function within the firm at the core of contemporary business organization and operations. Developing a framework for thinking about how businesses navigate these new legal risks becomes crucial. In this context, we propose three concepts for such a framework: genuine compliance, simulated compliance, and second-order observed compliance.