Global Trade Risks
Global Trade Risks
In today's world geopolitical influences have an increasing impact on the supply chain, security of supply and the ability of companies to sell their products.
For the last 20 years, the world has operated under a Global Free Trade environment with companies adjusting their supply chains to a Just in Time model with limited investment in on-site inventory.
What we have seen as a result of this is that this interconnected supply chain becomes seriously vulnerable when there are any disruptions - and we have had many of late.
Quoting from a recent BDO report “In this new era of connectivity no business will be isolated from global events”. BDO’s research has found that supply chain disruptions can cause an average 107% drop in profitability and decrease in performance for up to two years after the initial disruption.
As a result, companies need to think globally when planning strategy and forecasts.
Of primary importance in this is the access to specialist knowledge which can feed into board level discussions and decision making. However this knowledge is limited and often can only be accessed by Large Global companies. Our aim in BDO is to make this knowledge accessible at all levels to ensure that all our clients are prepared for today's world of increasing regulatory and supply chain risks.
Therefore we are delighted to be able to produce the first of our Quarterly Reports summarising the major developments Boards need to be aware of. We would be delighted to discuss this further with you in terms of the impact on your business.
On a regulatory basis it is our belief that the global regulatory environment will grow more complex as countries implement new policies to achieve geopolitical goals. As per our report:
Geopolitical relationships between major world powers remain in constant flux, influencing foreign and domestic policies which in turn will impact the flow of goods and services throughout the world. Global trade policy will likely bend towards protectionism over free trade, and countries will use different combinations of tariffs, incentives, sanctions and other measures to punish rivals, bolster domestic industries or achieve other goals.
Across all areas of policy, countries will first prioritise the wellbeing of their own economies and citizens, followed by that of their allies and strategic partners. The combinations of incentives, sanctions or other punitive actions to achieve these objectives will vary depending on the specific countries involved and the goods or services in question.
How to navigate this?
The impact of the global trade regulatory environment needs to be taken into account now for all companies as it will impact on sourcing and security of supply.
In addition, companies need to be aware of the due diligence standards being set by the EU Commission as legislation is being updated on a constant basis, particularly with regard to due diligence on suppliers, risks of forced labour, ESG criteria, the new carbon border adjustment tax etc.
Finally companies also need to be on top of sanctions and controls which are even more significant now following the Russian invasion of Ukraine. Most recently in this regard the Council of the EU has sent a bill to the Parliament for approval to add the violation of restrictive measures to the list of ‘EU crimes’ included in the Treaty on the Functioning of the EU.
Our service offering provides the following options:
- A quarterly update for your Board Meetings on issues of relevance to your industry.
- A tailored company specific update which will keep on top of and address your business issues including sourcing, sustainability, trade sanctions and due diligence requirements.
- An on-call expert service to attend meetings, update directly at Board Meetings and/or address and report on any specific areas you wish to have more in-depth knowledge on.
Our team is supported in this by
- Our Global Head of Regulatory & Public Policy Affairs based in Brussels
- Our Global Customs and Trade team who update us on affairs in each of the critical global trading regions
We also operate as part of the BDO Global Value Chain Solutions Group should you require any further advice in relation to your supply chain optimisation.
We believe that by providing this tailored knowledge for your company we can provide you with the expertise you need to manage current geo-political risks to your supply chain, stay on top of your Global Trade requirements and ensure you proactively control costs and risks going forward.