2 days ago
Global Tariffs: Dynamic Risk Management Meets Its Moment
The recent introduction of US-imposed tariffs has shaken global trade. While economists and financial analysts debate whether this on-again/off-again trade war fits into their model for geopolitical, economic, or supply chain risks, the result is the same: uncertainty and chaos sure to shake up business strategy for the foreseeable future. This new era of volatility will impact all companies regardless of industry or geography, forcing business leaders and technology leaders to think like risk leaders. Everyone must focus on what they can control and adapt swiftly and dynamically. This is the moment for which enterprise risk management was made.
Even in times of relative calm but perhaps especially in times of chaos, the purpose of risk management is not to remove all risks but to determine which risks are worth taking — and at what cost — in pursuit of strategic goals and business objectives. Two mantras should dictate your approach: context and control.
Context is key to risk response. For example, for the pharmaceutical, airline, and automotive industries, where safety is paramount, pivoting to new suppliers to avoid tariff impact may not be a viable short-term strategy, as new suppliers must be certified for safety and quality.
Control is critical for risk prioritization. Trying to predict and plan for what the US administration will do next on tariffs is not a suitable basis for a stable risk management strategy. To respond dynamically but in a collected manner:
US tariffs focus on goods, with a range of tariffs applied based on a highly specific focus on the balance of trade with specific countries and the United States. The US administration has not been shy about its desire to bring more manufacturing back to the US, but the US tariffs do not apply to services that make up the majority of the US's trade balance with the rest of the world. Don't forget to include services in your overall context and control lens and:
This post was written by VP, Principal Analyst Paul McKay and it originally appeared here.
