Risk and resilience professionals have often focussed on operational risks and left business risks to the CFO and the board, but the emergence of the use of tariff increases as an economic tool by the US Government shows that business risks are just as essential an area to consider for both organizational and operational resilience.
The use of tariffs by governments as an economic or political tool introduces significant business risks, including:
- Increased costs of imports and exports, affecting supply chains.
- Market volatility and price fluctuations, impacting profitability.
- Strategic shifts in global sourcing and production decisions.
- Retaliatory tariffs from other countries, creating geopolitical instability.
These are business risks, but they directly impact operations, requiring resilience professionals to engage in both business and operational risk planning rather than leaving business risks solely to finance and executive teams.
This highlights a shift in perspective — business risks can no longer be seen as separate from organizational and operational resilience. In today’s interdependent global economy, risks like tariffs, regulatory changes, and market shifts can disrupt core business operations, requiring resilience professionals to adopt a more integrated approach.
How are Canadian businesses responding to the threat of a tariff-based trade war?
A survey by KPMG in Canada has found that two-thirds (67 percent) of Canadian business leaders say that they can weather a trade war that lasts more than a year.
The uncertainty around US trade policy has had Canadian companies rushing to find ways to mitigate their risk and tariff-proof their organization, says KMPG in Canada. While it varies by company and industry, mitigation strategies include identifying areas to optimize and streamline operations, forming partnerships to open up new markets, diversifying supply chains, divesting non-core activities, exploring foreign-exchange hedging opportunities, incorporating tariff and transfer pricing plans, seeking exemptions, and securing subsidies or taking advantage of tax incentives.
With most (76 percent) surveyed businesses already undertaking a strategic review of their operations, 77 percent will identify potential acquisition or divestiture opportunities as part of their mitigation strategy and 78 percent admit they need to build resilience into their supply chains, the survey shows.
