How to mitigate supply chain risks stemming from geopolitical and trade tensions

Take a strategic, holistic approach to your supply chain

Treating each event as a one-off incident can limit your organization’s ability to proactively manage risk, allowing events to dictate your position. A holistic view of risks across the enterprise enables a more strategic and efficient approach, regardless of whether risks are retained or transferred.

Determine where you can further broaden your supply chains

Diversifying supply chains is a strategic imperative for enhancing resilience in an increasingly volatile global landscape. Over-reliance on certain regional suppliers, while historically cost-effective, exposes operations to significant risks such as sudden trade restrictions, geopolitical tensions and disruptions like those seen during the COVID pandemic.

Many organizations have already expanded into other regions such as Vietnam, Malaysia, Mexico, Central America, India, Bangladesh and Eastern Europe, which offer competitive manufacturing capabilities, growing infrastructure and favorable trade agreements. They’re also adopting "local-for-local" models and proximity sourcing such as near-shoring or friend-shoring to enhance their operational flexibility and resilience.

A multi-regional supply strategy enhances flexibility and responsiveness, positions your operations to better navigate regulatory changes and shifting market dynamics and helps mitigate vulnerabilities to ensure greater operational continuity.

Monitor and adjust according to regulatory, social and political changes

Staying informed about regulatory changes and compliance is critical for managing business risks. Yet in today’s complex geopolitical and social landscape, proactive crisis planning and public relations acumen have become even more essential. The rapid spread of information through social media and the advent of AI further underscore this need.

Brand crises have erupted due to political views expressed in the U.S., alienating customer groups. Issues such as U.S. regulations on cotton sourcing and the Chinese government's implications, as well as comments by brands that offend foreign customers over sensitive subjects can have a far-reaching impact. Investing in government relations to anticipate future regulatory shifts and mapping customer views and sensitivities are vital. Regular screening of suppliers, partners and third-party entities, along with proactive compliance measures such as automated monitoring systems and legal audits are critical to identify potential exposure to sanctioned organizations before they become liabilities.

Be mindful of local partners and joint ventures

Traditionally, global organizations have looked to local partners and joint ventures to insulate them from political challenges. But sometimes having a local partner can “localize” the crisis, drawing the multinational into the fray through its association and presumed position.

Consider insurance solutions to transfer risk

Investing in new or existing lines of insurance coverage can safeguard operations against the financial impact of geopolitical instability and trade disruptions. Political risk, trade disruption and trade credit insurance are critical tools for risk management amid fluctuating tariffs, retaliatory government actions, embargoes, trapped cash and unpredictable supply chain interruptions. These products cover losses stemming from government actions, civil unrest and currency transfer restrictions, which can otherwise derail operations and erode profitability.

Such protection can help your business remain confident in international dealings and long-term planning. Focus on countries or regions that have a high concentration of risk and are financially material to your organization. Seek coverage before the events are front-page news to ensure plentiful capacity and reasonable pricing. When in the market for these insurances, ensure your specialist broker is framing your risk with all the positive mitigation work being done to ensure competitive pricing.

Enhance supply chain visibility and support your end-to-end experience

By leveraging digital platforms and advanced analytics, you can gain real-time insights into inventory levels, supplier origins and potential risks along trade lanes. Such transparency enables quicker decision-making and more effective responses to disruptions such as port delays, natural disasters or geopolitical events.

In addition to digital tracking, adopting a “just-in-case” inventory model, where buffer stock is maintained, can further protect against unexpected shortages or delays. Unlike the lean “just-in-time” approach, this model prioritizes preparedness and continuity, especially in uncertain environments. Together, these strategies can help your business anticipate challenges and maintain customer satisfaction even when global conditions are unpredictable.

Regularly assess readiness to overcome challenging situations

Ongoing scenario planning has become even more important in today’s current environment. Tools such as tabletop exercises and enterprise risk management (ERM) frameworks enable you to simulate a range of potential disruptions, from a sudden imposition of tariffs to the blacklisting of key suppliers.

They also can help you evaluate preparedness to respond effectively. These simulations help identify vulnerabilities within the supply chain, test contingency plans and refine decision-making processes under pressure. Moreover, scenario planning fosters cross-functional collaboration, ensuring that all departments understand their roles during a crisis.

Enhance your logistics and distribution arrangements to remain resilient

For retailers in particular, optimizing logistics and distribution is a key way to maintain operational efficiency and cost control in the face of uncertainty. Bonded warehousing or customs warehouses are secure storage facilities where shippers can hold imported goods before dispatch, which considers goods still in transit and not officially imported. That way your business may defer duties and taxes until goods reach their final destinations. This option offers flexibility in managing inventory and responding to tariff changes.

Additionally, partnering with adaptable logistics providers allows operations to reroute shipments, adjust delivery schedules and navigate port delays more effectively. These measures can contribute to smoother fulfillment processes and help avoid costly disruptions. In this current trade environment, having a logistics network that can pivot quickly is essential for meeting customer expectations and preserving margins.