Supply chains have suffered not only massive cyberattacks but also sanctions risk. This expert explains how businesses can stay geo-politically resilient.
Globalization has opened up doors for borderless business transactions. Increasingly, the implementation of new policies in certain jurisdictions will impact other territories.
This interconnectivity involves understanding the effects of the geo-political landscape and the accompanying sanctions brought about by evolving global regulations and legislation.
In Asia, rising tensions between the US and China have triggered the creation of China’s Anti-Foreign Sanctions Law. This move primarily aims to protect Chinese interests on a global scale. The foreign policy measures and countermeasures of these two economic superpowers create new legislation affecting the conduct of businesses in the Asia Pacific region, necessitating businesses to develop measures to mitigate the effects of such sanctions.
Geopolitical resilience as a business strategy
The responsibility for developing these measures rests on the shoulders of executive-level managers of both local and international companies. They will need to keep abreast of reports in mainstream news media on worldwide events that can have an impact on their businesses. The ever-changing and complex issues that arise will require them to assess the effects of sanctions laws and controls, with responsive decisions that could impact supply chains.
Adding to the scale of the challenge faced by C-suite executives are the divergent policies and regulations of nations within particular jurisdiction controls, with these often encompassing diverse business cultures and economies.
Sanction-hardening the supply chain
In order to remain compliant with evolving sanctions, business leaders must carefully scrutinize all aspects of their supply chain.
This includes a thorough screening of third-party providers that could present the risk of labor practices that run counter to stipulated regulations.
However, this may be easier said than done, especially when transactions are indirectly conducted through major trading hubs in Asia. Leaders need to constantly and carefully assess business climates and trends while proactively checking minute changes, in order to harden their corporation’s supply chain and boost resilience in the evolving regulatory landscape.
In certain jurisdictions, there will also be cases where current circumstances do not warrant sanction controls. However, top-level executives must have the foresight to identify potential threats and lay the foundations for suitable mitigation measures in advance to ensure proper compliance and supply-chain continuity.
The problem with sanctions and their accompanying regulations is that there are areas that can be affected by changes in the geopolitical landscape. For instance, a shift in policies governing blocking assets and trade restrictions by the US will influence trade and commerce in the region. Or, a Singaporean firm may face current sanctions in dealing with countries such as Myanmar and North Korea, but it may find these regulations lifted in the future.
Stricter measures are being put in place by regulators. Corporate fines which used to be taken into consideration, are no longer deemed sufficient.
The responsibility now rests on the shoulders of senior-level directors. They will be accountable and held liable for any malpractice committed by their staff if this leads to prosecution. This is such a daunting task, making it imperative that they implement risk mitigation strategies befitting the needs of their company.
To protect their organization from sanctions risks, leaders need to anticipate changes and create a viable risk mitigation strategy. It is, therefore, important to:
- have horizon scanning executive-level managers who continuously monitor current events. This will ensure company readiness should problems arise
- ensure proper documentation and discussion in the agenda of company meetings, to protect the supply chain
- place individuals that are both knowledgeable and experienced in dealing with the entirety of the supply chain in key positions.
- invest in the latest advancement in effective compliance tools and other AI systems that will complement the expertise of key personnel. This will ensure early detection and intervention of sanctions risk violations.
- Conduct regular, up-to-date company training and education on the ongoing changes in the compliance landscape, through courses by compliance specialists such as ICA
Notably, regulators are aware that even with the best training, strategies, software, and people, mistakes will still happen. What is important is for organizations to have systems in place to ensure that, when problems do arise, prompt self-disclosure to regulators is expected, including creating viable protocols to make sure that the problem will be properly addressed.
If set up properly, top-level management, their entire team, and the company in general, will be properly protected amidst ever-evolving global supply chain regulations.