Global supply chains face relentless pressure, with challenges ranging from geopolitical instability and economic volatility to severe weather, labour shortages, and shifting consumer expectations.
Tariffs, and the retaliatory measures that often follow them, have climbed the corporate agenda as a visible disruptor in global trade, claims Moody’s.
The imposition of tariffs typically brings higher costs, slimmer margins, weaker demand, and production delays. It is no surprise that they dominate conversations around supply chain disruption. Yet tariffs in isolation are rarely the true breaking point. More often, it is the financial fragility of suppliers—magnified by tariffs—that causes breakdowns. Building resilience, therefore, depends not only on tracking tariff changes but also on identifying which suppliers have the financial strength to withstand them.
The financial health of suppliers is increasingly central to supply chain decision-making. While some suppliers can absorb levies of 10% or even 15% on raw materials or components, others—particularly smaller or financially vulnerable firms—struggle under similar pressures. In some cases, the inability to pass costs upstream results in cutbacks on investment and operations, degraded product quality, or delayed shipments. The most serious consequences can include outright closure. Without ongoing monitoring of supplier stability, companies often have little advance warning before these risks crystallise.
For many organisations, financial due diligence takes place only once, during the onboarding of a supplier. After that, attention shifts to performance measures such as delivery schedules, compliance, or quality. While important, these metrics fail to capture the hidden risks associated with financial stress. Suppliers under strain seldom flag their issues directly; warning signs tend to surface instead through subtle shifts in payment behaviour, production hiccups, or reductions in workforce. Without tools to detect these early signals, supply chain teams risk being caught off guard.
According to Moody’s, tariffs may appear to drive disruption, but financial fragility is often the real cause. The company stresses that building resilience requires continuous monitoring, not one-off checks. That does not mean exhaustive audits of every supplier, but rather applying a structured, prioritised approach to focus on critical partners. Using financial risk indicators and early warning mechanisms allows firms to detect stress before it cascades into disruption.
Moody’s draws on its expertise in financial risk analysis to support organisations navigating these challenges. By combining comprehensive supplier data with AI-driven analytics, it provides decision-makers with actionable insights. The aim is to help companies strengthen relationships with key suppliers, mitigate risks, and safeguard operations in an unpredictable global environment.
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