Many companies rely on cross-border supply chains or service provision, to ensure just-in-time delivery of goods and services. Indeed, such mechanisms have underpinned the prosperity of Asia in recent decades.

Geopolitical strains

However, a changing geopolitical climate is now presenting acute risks to companies, in terms of demands for decoupling, protectionist tariffs, intrusive data rules, export controls, import quotas, technology theft, financial sanctions, and other measures weaponised by governments. Companies need to respond rapidly to these changes.

Addressing challenges

Any decoupling decision, though, requires careful consideration and planning, including detailed and practical risk appraisals, so as not to jump from the frying pan into the fire, and to avoid unanticipated risks.

For those not decoupling, ensuring that a business complies with rules is harder, given contradictory regulations, differing policy priorities, and governments that are inclined to see engagement at times as “unpatriotic”.

The immense scale of existing production chains, and a common reliance on sub-tier suppliers only adds to risks, leaving companies inadvertently at risk of breaching rules.

Even those acting in good faith could find themselves facing claims of association with governments, or their proxies, and hence become targets of regulatory action.

SVA has a great deal of experience in dealing with such challenges in Asia, and more widely, and has supported many clients in understanding their exposure to risks, and in implementing measures that protect company interests.

Supply chain or partnership assessments

SVA can assist companies in appraising supply chains or partnerships.

This service will help boards and executives gain a deeper, independent understanding of the risks facing company interests in this politically charged climate.

Such assessments are of particular importance in the manufacturing industry, where supply chains can be immensely complex, and where reliance on a particular provider, even at a degree of separation, could result in regulatory action.

However, such assessments are necessary for all-and-any parties engaged in partnerships, in industry and services alike, given the heft of state-owned enterprises in Asian states, and the deliberate politicisation of such ties.

Monitoring and advisory work

Rules and regulations are prone to change at short notice, often in response to unpredictable political requirements.

Such measures may render previously reliable and uncontroversial supply chain structures suddenly costly, liable to intense scrutiny, or even untenable.

Moreover, such risks are intensifying given demands for decoupling, and as states seek to gain control of key inputs. These changes also generally have a “ratchet” effect, in that few are dismantled.

SVA can advise companies on these emerging risks, thereby providing companies with advance knowledge on which to act.

This knowledge can inform executive decision-making, and so assist in implementing and profiting from any pivot.

Advice on response

Companies may need to restructure supply chains so as to reduce the risk of disruption, regulatory breach, or other threat.

However, such restructuring is not straightforward, particularly in instances where production-lines are well-established, or technical expertise is concentrated.

Companies thus need to ensure that new partners do not simply rely on existing input providers, or introduce new problems.

Executives also need to conduct appraisals of new partners or destinations, so as to forestall the emergence of unexpected risks.

SVA can advise companies ahead of any decoupling, and so help to minimise costs and risks, and to assist in growing revenues.

We stand ready to be of service in any of the above.