Article

Anticipating trade uncertainty with supply chain resilience

The primary constant in today’s risk environment is change; and the most competitive organisations will be fully dialed into their supply chain exposures and supplier relationships to better anticipate risks in response to global events, including tariffs.

Changes in trade policy globally can create uncertainties for businesses and their supply chains. But organisations have an opportunity to rewire their supply chains for resilience — to adapt their sourcing capabilities, mitigate potential financial impacts, and protect their businesses from new exposures.

Tariffs and other trade-restricting measures globally could have significant economic consequences for businesses, according to the Global Risks Report 2025.

Managing these changes will require rethinking existing supply chain strategies. Companies may experience increased component costs, sourcing challenges, and reduced operational efficiency while they reassess their manufacturing capabilities or look to alternative suppliers.

A recent Marsh analysis of suppliers that support its multinational clients operating in the US revealed that 40% of these organisations’ direct and indirect suppliers are based in Canada, Mexico, and China. On average, this represents roughly one-fifth of any organisation's direct supplier base which could be impacted by geopolitical conditions.

As they navigate an evolving geopolitical landscape, organisations face new risks as well as promising opportunities to strengthen their supply chains and build long-term resilience. Navigating this complexity with confidence will require enhanced visibility into supplier relationships.

A closer look at tariff-related exposures

Changes in the geopolitical environment, including tariff policies, can create uncertainties for businesses, potentially increasing the cost of imported components or making it prohibitively difficult to access them. The automotive industry has long grappled with this reality, though the issue is now touching many other industries.

However, companies across sectors can better navigate these changes by embracing new ways of thinking about and managing their supply chain risk. The first crucial step in doing so is to improve our understanding of how supply chains work through better mapping and assessment of the following risks:

New exposures: Working with new suppliers in new regions can introduce risks that organisations may not have encountered before, including heightened exposure to climate risks, political instability, etc. Relocating from one country to another may also lead to concentration risks, with reliance on a single alternative market.
Longer production cycles: Finding and onboarding new suppliers can extend lead times, impacting inventory management, delivery of service, and customer experience.
Compliance: Navigating different regulatory environments and compliance requirements with new suppliers can complicate operations and increase legal exposures.
Quality control: Sourcing from new suppliers may impact product quality, requiring additional oversight and quality assurance measures.
Currency fluctuation: Sourcing from international suppliers may expose companies to currency exchange risks, which can further affect costs and pricing strategies.
Supplier dynamics: Transitioning to new suppliers may strain existing relationships and disrupt long-term partnerships that have been mutually beneficial.

These issues can collectively impact a company's operational efficiency and profitability, necessitating strategic planning and adaptability in supply chain management.

Emphasising proactivity instead of reactivity

Organisations are already adjusting their supply chain strategies to adapt to a changing risk environment. You can follow suit and be more proactive by:

Understanding your global supply chain footprint and supplier relationships
Identifying the specific components of your products that are originating in affected regions
Quantifying the potential impact of tariffs on your costs
Exploring alternative suppliers and sourcing opportunities where possible
Recognising the global geopolitical trends shaping new trade policies, as outlined in the forthcoming Political Risk Report 2025

In an increasingly integrated global value chain, where many organisations have outsourced operations, pinpointing true exposures has proven difficult. And historically, supply chain mapping beyond Tier 1 suppliers has been a labor-intensive effort.

Data from Marsh reveals that 65% of organisations have at least one single point of failure or bottleneck hidden in their supply chain that is providing something critical.

However, recent developments in artificial intelligence (AI) and supply chain management technologies are creating potential new opportunities for organisations to evaluate their vulnerabilities and gain greater visibility into blind spots deep in their networks.

The intersection of AI and supply chain mapping

While companies cannot control all external forces weighing on their supply chains, they can proactively enhance their risk management strategies by embracing innovation, including more sophisticated supply chain mapping.

Advances in AI technology have provided organisations a rare opportunity to rapidly gain insights into how supply chains work beyond what was previously visible. Without this innovation, organisations were largely limited to manual processes of supply chain mapping that were not only extremely time-consuming, but highly reliant upon their suppliers providing quality information.

AI technology empowers organisations to not only assess their direct suppliers, but also their suppliers’ suppliers.

Supplier tier classification

The tiers in a supply chain represent the different levels of suppliers involved in the production process, each contributing specific components and materials essential for delivering the final product.

Tier 0 consists of the original source of production, such as a factory in the UK that manufactures minivans.
Tier 1 suppliers, like a dashboard manufacturing facility in Hungary, provide finished components directly to the organisation.
Tier 2 suppliers, such as a steering wheel production factory in Mexico, supply parts to Tier 1.
Finally, Tier 3 suppliers, exemplified by a factory in China producing diodes, provide essential materials to Tier 2 suppliers, supporting the overall supply chain.

AI technology enhances visibility across these tiers, enabling organisations to identify and assess risk vulnerabilities throughout their entire supply chain.

Equipped with visibility at Tier 2, Tier 3, and beyond, organisations can rapidly create comprehensive maps that pinpoint low, medium, and high-risk vulnerabilities down to site, supplier, or component-specific levels. This level of granularity is essential for understanding a broad range of risks, including tariff exposures in regions subject to fluctuating trade policies. This proactive approach enables companies to access reliable and detailed supplier information that can:

Inform their sourcing strategy
Help them diversify their supplier base
Develop contingency plans to mitigate potential financial impacts

Equally important to harnessing new technology is having human specialists available to interpret insights and coordinate strategic responses. Marsh McLennan has introduced an AI-powered platform, Sentrisk, which combines advanced analytics with integrated advisory services to help you navigate the complex and opaque nature of today’s supply chains.

For more information about strengthening your supply chain in the face of new and evolving risks, speak with a Marsh representative.