Trade and supply chains have existed for centuries, intertwining the fortunes of countries, businesses, and people around the world.
But so too have threats that can hinder – or even halt – the flow of goods and services. Today, thanks to an increasingly interconnected
world, these threats are themselves intertwining and creating a risk environment for global commerce with unforeseen levels of complexity.
This is the Era of Exponential Risk, where the volatile geopolitical environment can dramatically alter how organizations and governments
understand and prepare for potential threats to their supply chains.
The pace of change is accelerating. The peace dividend that spurred greater globalization in supply chains at the turn of the 21st century
appears to have dwindled. Conflicts in Eastern Europe and the Middle East, on top of geopolitical tensions between major global economic
blocs, are constricting business operations as sanctions, tariffs, and fragmented trade policy regimes take hold.
With an unprecedented number of national elections in 2024 – in countries that account for over half the world’s population –
the risk of economic nationalism as politicians appeal to voters adds an additional element of risk.
This geopolitical uncertainty is also taking place against a backdrop of volatile commodity markets and extreme weather events.
Risks upon risks, combining to increase the likelihood and severity of unforeseen developments and outcomes. Yet the greatest risk
for businesses lies in treating each source of risk as a silo – each as its own separate domain. In the Era of Exponential Risk,
organizations must look at risks holistically, taking into account how they interrelate with one another.
And in addition to looking at supply chain risks together, organizations must at the same time look forward. Studying past patterns
is no longer sufficient. The volatile geopolitical environment – combined with other risks like weather events – creates new, hidden
risks both downstream and upstream that leaders must not only anticipate but get ahead of.
Successfully developing plans for what could happen requires leaders to embrace today’s most powerful analytics and technologies while
joining data from across risk domains to draw bold, perceptive insights. To not only collect data, but to make sense of it.
And this is where Moody’s is in a class of its own.
Through a range of offerings that join unparalleled data on individuals and entities with powerful analytical solutions and a world
class team of risk experts, Moody’s helps its customers understand and manage not just their supply chains but their entire supply
ecosystems. To onboard, manage, and monitor the people and companies they do business with.
"Increasingly, organizations are looking for consolidated views of who they’re doing business with across a complex flow of goods, services, information, and money. What was once kept siloed in areas of cyber, trade, compliance, and environmental reporting can now be assessed, monitored, and managed at the portfolio level, allowing organizations to turn today’s risks into tomorrow’s opportunities.”
– Keith Berry
General Manager, Know Your Customer Solutions, Moody’s
In an exponential risk world with a tangled web of relationships, it’s essential to know exactly who you’re supplied by and selling
to – and where those partners sell to in turn. Take the prominent U.S. manufacturer whose components show up in an Iranian weapon
used in Ukraine – without the company’s consent, via the black market, multiple links down the chain.
Raising the stakes further are growing regulatory requirements to understand the organization, company, or individual on the other side
of a commercial relationship. Doing business with the wrong people, even if several steps removed from your core partners, can create
hidden business risk, financial risk, and – increasingly – legal risk.
Sanctions ignited by geopolitical issues pose a similar threat to credit and investments. Freezes and seizures of Russian real estate
assets in markets like London, or the withdrawal of Chinese businesses from Florida, have unforeseen knock-on effects on companies,
investors, and economies alike.
Thankfully, the knowledge available to leaders has evolved. A comprehensive, forward-looking understanding of relationship risk in the
supply chain was not possible as recently as five years ago. The data was not easily accessible or organized in a way that could yield
actionable intelligence quickly. Hidden relationships and complex ownership structures were hard to spot.
As a technology and innovation leader on the forefront of risk assessment, Moody’s is able to reveal these hidden patterns, relationship
vulnerabilities, and little-known risks by joining disparate data sets. The integrated, holistic view of risk helps market participants
decode risk and unlock new opportunities.
Given their importance, complexity, and vulnerability, it's no surprise that supply chain risks and geopolitical issues are mainstays
on corporate board room agendas. Proactive risk assessment is the new normal, replacing the old model of reactive and siloed supply
chain management that becomes a priority only when disruption strikes. The growing complexity of supply chains requires information
across multiple layers of customers and suppliers that is consistent, comparable, and up-to-the-second.
Moody’s integrated risk solutions combine millions of data points – operational risk, financial health, climate vulnerabilities,
geopolitical developments, macroeconomic indicators, and more – with bold, perceptive insights that provide customers with holistic
views of risk. Actionable perspectives that allow leaders to make decisions with confidence while building flexible and reliable supply
chains that can thrive in the new Era of Exponential Risk.
Moody’s supplier risk management
