Disruption Now a 'Core Financial Exposure' for Supply Chain Leaders

More than 94% of supply chain leaders expect to shift a critical portion of their supply base to other regions within the next six to 18 months as a result of tariffs and other geopolitical pressures.

According to a survey of 200 chief procurement officers and chief supply chain officers, conducted for risk management software company Sphera, business leaders are facing a growing pressure to diversify their suppliers to mitigate the impacts of regulatory shocks brought on by tariffs. Nearly three-quarters have also gone through supplier disruptions in the past year, while 23% reported significant losses as a result of those disruptions.

"Disruption is no longer a background risk — it is a core financial exposure," Sphera said in its report released on October 14. "Whether losses are significant or modest, the majority of organizations are seeing supplier disruption translate directly into revenue leakage, margin erosion and operational instability."

The task of shifting supply bases has proven to be tricky too, with 33% citing slow supplier risk checks as their top challenge, followed by compliance documentation and audit readiness at 26%, data accuracy in emerging markets at 21.5%, and visibility into tier 2 and tier 3 suppliers at 16%. And while leaders seem to know where they want to shift their supply bases, they often lack the infrastructure to make the move quickly and efficiently, Sphera noted. That's created a "growing execution gap," where strategies that make sense on paper have been delayed by fragmented or unreliable data.

Although supplier risk checks are essential for protecting businesses from financial or reputational damage, they've also become a significant bottleneck, as leaders have sought to diversify to other regions quickly. Nearly two-thirds of respondents said that they require more than a day, and up to a week, to complete a supplier risk review before awarding business, while 30.5% said that they need more than a week, and up to a month.

"In a market where supplier disruptions surface weekly or even daily, review cycles of several days or weeks simply don't align with the tempo of risk . By the time a risk profile is assembled, the underlying conditions may have shifted." - Sphera

To bridge that gap, supply chain leaders are turning to generative AI to provide risk assessments, with 31% reporting faster operational decision-making as the biggest benefit the technology can impart on their operations. Another 28% said that they believe GenAI can provide them with better cost savings, 24% said they expect more revenue protection from disruption, and 18.5% believe that the technology can shorten disruption windows.

Source: Supply Chain Brain

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