How Digital Transformation Aligns Supply Chains With Compliance, Sanctions Risk

Mitigating risk by controlling the controllable is increasingly top of mind for global, enterprise businesses.

And with the news Friday (Sept. 13) that the White House is considering closing a rule that allows foreign eCommerce giants, such as Shein and Temu, to ship direct to U.S. consumers without duties or taxes if their shipment’s aggregate fair retail is $800 or less, identifying where their own supply chain risks lie is becoming a pressing challenge for firms around the world.

After all, in an era of geopolitical uncertainty, rising protectionism and growing regulatory scrutiny, managing compliance and sanctions risk has become a key priority for savvy firms looking to expand internationally and win greater market share relative to their peers.

In the realm of sanctions compliance, even minor missteps can have devastating financial and reputational consequences. As international trade becomes more complex, the need for real-time intelligence and innovative financial solutions has grown exponentially. Businesses can no longer rely on traditional methods of monitoring their supply chains, as the dynamic and unpredictable nature of modern trade demands faster, more accurate data to mitigate risks.

At the intersection of these challenges sit ongoing advancements in supply chain financing and real-time intelligence tools, which are emerging as essential components for companies to navigate an increasingly treacherous landscape.

See also: The Convenience-Compliance Conundrum in Cross-Border B2B Payments

Staying Ahead of Rising Threats Impacting Global Supply Chains

Today, the global sanctions landscape includes a myriad of lists, each containing hundreds of entities across multiple jurisdictions. These include not only countries but also specific individuals, organizations and even vessels that are blacklisted. Whereas in the past, businesses might have had to worry about avoiding trade with a handful of embargoed nations, the scope and complexity of global sanctions have grown dramatically in recent years.

Supply chain compliance has traditionally been viewed through the lens of ensuring that partners and suppliers adhere to the same standards as the parent company. This can include everything from environmental regulations to labor practices to tax requirements.

However, the growing complexity of sanctions regimes has added an entirely new dimension to supply chain compliance: the need to ensure that every partner, at every step of the supply chain, is in full compliance with all relevant sanctions and requirements across far-flung jurisdictions.

July PYMNTS Intelligence revealed that concerns over supply chain integrity and macroeconomic conditions highlight how larger external factors also remain on CFOs’ radars.

“For any business conducting commerce across multiple countries and jurisdictions, the continuous evolution of the tax landscape has become the norm. This is why we advise customers to have a long-term strategy when it comes to tax and compliance so that no one event or outside factor can disrupt your business operations,” Sovos President of Revenue Alice Katwan writes in a new PYMNTS eBook, “Beyond the Horizon: How to Identify Unexpected Threats That Could Impact Your Business.”

In many cases, businesses are unaware of the full extent of their compliance vulnerabilities until it is too late. A supplier several steps removed in the supply chain may be engaging in prohibited activities, such as dealing with a sanctioned company, without the knowledge of the primary business. As such, there is an increasing need for tools that provide greater visibility into the entire supply chain.

Read more: Embedded Finance and the Great Supply Chain Reset

The Future of Compliance in Global Supply Chains

While the entities holding the best and most granular information about supply chains tend to be private companies, PYMNTS has previously covered how traditional methods of compliance management often fall short due to their reliance on manual processes and retrospective analysis, highlighting the role that future-fit advances like artificial intelligence (AI) can play in both securing and streamlining the global business landscape by helping firms enhance their AML compliance and detect suspicious activity in real time.

Traditional, manual methods of compliance monitoring — such as periodic audits and static databases — are no longer sufficient. Instead, companies need automated solutions that can provide continuous monitoring of their supply chains and alert them to potential violations as they occur. Real-time intelligence tools, after all, allow businesses to track the movements of goods and materials across borders, monitor the activities of their suppliers and partners and ensure that they are complying with the latest regulations.

While real-time intelligence helps businesses identify and manage compliance risks, supply chain financing offers another layer of protection. Supply chain financing solutions provide companies with access to liquidity, allowing them to maintain the financial flexibility needed to navigate disruptions, such as those caused by sanctions.

In recent years, supply chain financing has evolved beyond traditional trade finance solutions to include more sophisticated options, such as dynamic discounting, reverse factoring, and payables finance. These solutions allow businesses to extend credit to their suppliers, ensuring that they can continue to operate even in the face of financial or regulatory challenges.

And real-time intelligence and supply chain financing are not just useful tools — they are becoming essential components of a modern, risk-aware supply chain strategy. By providing greater visibility into the supply chain and offering financial flexibility, these solutions help businesses mitigate compliance risks and adapt to new challenges as they arise.