The radical policies of US President Donald Trump, and sharp retorts from China and others, threaten wrenching changes across the Asia-Pacific region – buffeting both economic and security structures.

Company directors cannot predict how events will play out, given that media assessments are often inaccurate, or lack the bandwidth for incisive reporting – but what is clear is that the results will be disruptive and costly.

In particular, companies could face political pressure, reduced market access, predatory regulatory action, declining profits, higher debt levels, disruption to supply chains, and more frequent instances of non-payment or default, in the months ahead.

Despite the troubling outlook, companies can still take steps that protect their interests, and also assist in identifying the opportunities sure to emerge at this time of upheaval.

SVA believes that companies should prepare to act in four key areas in such challenging conditions. SVA specialises in these service lines, and stands ready to be of assistance:

1. Impact analysis and political risk assessments, geared to a company’s unique situation and profile.
2. Investigation of key stakeholders, partners, and vendors, to identify financial vulnerabilities.
3. Supply chain analysis and investigation, to identify weaknesses, or to find alternative providers.
4. Bolstering of crisis containment mechanisms, to ensure resilience.

Shock and awe

Punishing US tariffs promise severe changes to regional trade flows – and China is acutely at risk. Worse, the new tariffs build on a medley of taxes, administrative restrictions, and financial sanctions already aimed at Beijing.

The real devil is in the detail, though. Changes to American postal rules could harm textile businesses, such as Shein, pharmaceutical companies may face investigations aimed at halting trade in fentanyl precursors, and high-end semi-conductor producers, already subject to extensive export controls, may face new restrictions.

Beijing has already started to kick back. The Chinese government has reactivated an investigation into Google, has added US fashion businesses to its Unreliable Entity List, and has reduced exports of key commodities, such as rare earths. Other actions will follow, absent wider agreement.

Moreover, China is not the only Asian state under threat. Those that run trade surpluses, such as Japan, Singapore, South Korea, Taiwan, and Vietnam, are all at risk. Indeed, the Vietnamese dong has tumbled on such fears – and other currencies may yet fall.

Ultimately, any trade conflict will accelerate a decoupling process already under way, and may add to capital costs, cheapen the value of securities, and put pressure on states with a weak balance of payments. A rush to gold hints at investors’ fears.

Political and strategic risks

The trade conflict will also add to regional tensions. The US-led alliance system was already under strain, thanks to China’s growing military strength, deepening ties with Moscow, and frictions over the South China Sea and Taiwan.

Now, though, President Trump’s unscripted comments on Taiwan, determination to end the conflict in Ukraine, and targeting of allies with threats and tariffs, have cast doubt on Washington’s willingness to uphold regional security. The US is behaving like a “landlord seeking rent”, according to Singapore’s defence minister, Ng Eng Hen.

This approach may corrode governments’ willingness to act at US request, or even to behave impartially towards foreign business. Officials could tighten regulations on capital movement, data protection, or labour requirements – any, and all, of which can be used as non-tariff barriers.

Sanctions are a particular consideration in this context. Some states, such as China, have prohibited compliance with US rules, but the cost of non-adherence could be severe – leaving companies caught between a rock and a hard place.

What companies can practically do

Naturally, boards will gaze into the crystal ball – but they need to be realistic about their forecasts. There are just too many variables at work. Rather, businesses should focus first on helping themselves.

In particular, boards should: carry out appraisals of political and strategic threats; conduct asset searches into key customers, vendors and suppliers; assess potential disruptions to supply chains; and strengthen crisis management mechanisms.

These actions will help directors and executives frame appropriate responses.

Political and regulatory risks

As a first step, boards should assess exposure to immediate risks, such as political or regulatory targeting, media criticism, boycotts, and protests. The exact threats will depend on the jurisdiction and industry.

Companies need to be conscious that the sudden closing of loopholes could strangle entire businesses overnight, and that governments can “weaponise” even minor rules. Hitherto arcane matters, such as conflicts of law, could pose unexpected threats.

After assessing the risks, boards should prioritise responses to the most acute threats, and plan how best to respond – perhaps by restructuring companies, or by reallocating capital.

On the upside, these appraisals can also identify opportunities. Companies can benefit as their competitors struggle to adapt.

Payment risk

Of critical importance will be working out which customers, vendors or providers will prosper – and which will fail. The most obvious starting point, here, is to assess which are systemically important counterparties.

Boards should then identify those that are frail, and can then scale back exposure, perhaps by altering payment terms, hedging, or introducing alternative providers, as appropriate.

Companies should also drill down into priority liabilities, by carrying out detailed asset searches. Such investigations will reveal early indicators of distress, and offer insight into the nature and location of assets, should efforts to recoup funds be necessary.

Boards should also be aware that asset searches can provide opportunities, by offering insight into acquisition targets.

Supply Chain Risk

With regard to supply chains, boards should re-assess existing operations, so as to identify vulnerabilities and chokepoints, and should reduce reliance on controversial or exposed providers.

As part of this process, boards need to examine suppliers across the whole supply chain, taking account not only of longstanding partners, but also of those outside the formal structure, who may sell only to sub-contractors. A failure to chart such depths could leave businesses inadvertently in breach of sanctions, or export controls.

Such assessments have additional benefits, though, as they can help boards make strategic decisions on whether to “decouple”, and to understand how best to do so without “jumping from the frying pan into the fire”.

Crisis management

Finally, firms need to ensure that their crisis management mechanisms are fit-for-purpose.

After all, many crisis teams have a history of responding effectively to issues such as product contamination, or media criticism, but may lack experience of the higher-order risks now emerging. Such systems could crumple when under strain.

Boards should thus “stress-test” mechanisms to a greater intensity, retrain staff, and recruit those with additional skillsets. Companies should also be mindful of how well communications systems might function at times of pressure, and take remedial action, if need be.

SVA stand ready to be of assistance – please feel free to contact us for a discussion in confidence.

SVA

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals, and insurance companies and underwriters around the world.

SVA has three core lines of business, which are: Business Intelligence and Political Risk; Corporate Investigations; and Special Risk.

SVA is based in Hong Kong, Singapore, and London and operates globally.