2025 J.S. Held Global Risk Report: Global Supply Chain Challenges

Introduction

The importance of the global supply chain has never been more apparent since the COVID-19 pandemic resulted in worldwide shortages of products and drove prices and inflation skyward. Supply chain disruptions have become the norm, attributable to an array of modern-day events and conditions including climate change, natural disasters, cyberattacks, fraud, or geopolitical instability, such as conflict in the Middle East or the Russia-Ukraine war. Gone are the days when companies could blame production problems on their suppliers and not take responsibility. Increased globalization from the interconnectedness of companies makes them and their supply chain more vulnerable, ranging from cyber incidents caused by internet proliferation to basic material shortages. Further, customers are demanding to know where a company’s products come from, how they are sourced, how they are manufactured, and if any part of the process has a deleterious effect on people or the environment. Governments have responded by enacting new rules and regulations, or enforcing older ones, to ensure supply chain accountability is a major priority for companies in every industry. This is true especially within the European Union, where individual member-states have enacted protective legislation and rules. As consumers, governments, and corporations acknowledge the effects of supply chain risks, transparency and due diligence will become more critical to the internal compliance structure of global businesses. The enactment and greater enforcement of laws focused on sustainability issues have increased the obligations on companies to examine the sources and actions of their suppliers and how it all impacts the entire value chain.

Global Supply Chain: Risks

1. Geopolitical risks in the Middle East between Israel and Hamas and the ongoing war between Russia and Ukraine, plus anticipation of tougher sanctions
2. Natural disasters and extreme weather events
3. Disruptions in key routes – such as the Suez Canal, Panama Canal, and Red Sea – increasing freight rate volatility
4. A patchwork of laws, rules, and regulations that vary by jurisdiction, such as:
   1. The EU Corporate Sustainability Due Diligence Directive (CS3D)
   2. The EU Corporate Sustainability Reporting Directive (CSRD)
   3. The Supply Chain Act
   4. The UK Economic Crime and Corporate Transparency Act
   5. The UK Modern Slavery Act
   6. Australia’s Modern Slavery Act
   7. Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act
   8. The UK Bribery Act, US Foreign Corrupt Practices Act, Canada’s Corruption of Foreign Public Officials Act, Australia’s criminal code addressing anti-bribery, plus a multitude of countries in Asia-Pacific where private sector bribery and / or bribery of foreign public officials is illegal
   9. Germany’s Supply Chain Duty Act
   10. Anti-Greenwashing regulations updated in the EU and UK, including:
       1. The Directive on Empowering Consumers for the Green Transition
       2. The Corporate Sustainability Reporting Directive (CSRD)
       3. The Sustainability Disclosure Requirements (SDR)
       4. Revised guidelines from the UK’s Financial Conduct Authority
   11. The EU Deforestation Regulation (EUDR), which covers seven commodities—cattle, cocoa, coffee, palm oil, rubber, soy, and wood—with enforcement likely to begin late 2025
   12. Greater enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), preventing goods produced in China’s Xinjiang Uyghur region from entering the US
5. Cyber threats / cyberattacks on third-party suppliers or vendors in the supply chain
6. Second Trump Administration’s proposed US tariff increases which could result in retaliatory counteractions by affected exporters to the US and other trade partners. Proposed tariff amounts, include:
   1. 10% to 20% on all imports
   2. 25% to 50% on Chinese semiconductor chips
   3. 60% or higher on all other goods coming from China
7. Dependence on critical minerals / materials / rare earths that are mined and imported from geopolitically risky locations and jurisdictions with which relations are strained or hostile
8. Financial leakage through deliberate overstatement of pricing and costs, lack of policing, and control of contractual supply chain terms

Global Supply Chain: Opportunities

1. Transparency and traceability via blockchain and other automated mechanisms
2. Greater use of advanced technologies in the supply chain can result in lower logistics costs with better tracking and monitoring of goods
3. Reshoring and nearshoring depending on the industry – in the US, for example, under the CHIPS and Science Act’s semiconductor provisions, some production of leading logic and memory chip manufacturing will be brought back into the country
4. Companies incorporating sustainable, ethical, legally compliant supply chain strategies will gain a competitive edge due to improved reputation among consumers
5. Providers within the Supply Chain as a Service (SCaaS) market, which includes the outsourcing of supply chain management (i.e., warehouse, logistics, and supplier / vendor management) will see large growth
6. Greater diversity within supply chains by adding more locations and suppliers
7. Innovations for finding replacements and alternatives for product supply chains are evolving and can lower the cost of production
8. Data accessibility allows all parties within a supply chain to have access and use real-time information to help with scheduling, finding optimal routes, lowering costs, and improving traceability to pinpoint and resolve problems quickly

Supporting Statistics