In response, approximately 44% of Canadian businesses are rerouting exports through third-party countries, while another 44% are considering similar diversions. While these adjustments aim to mitigate the financial burden of tariffs, they also expose businesses to heightened risks, including supplier fraud, contractual disputes, and cybersecurity breaches.
KPMG has sounded the alarm, warning that rapid changes to supply chains may lead businesses to engage with fraudulent suppliers. In the rush to adapt, companies may overlook critical due diligence, increasing the likelihood of financial fraud, misrepresented contractual terms, or hidden clauses that could disrupt operations.
Cybersecurity risks are equally pressing. As businesses shift to new or less secure suppliers, they may inadvertently introduce vulnerabilities into their supply chains. Sophisticated threat actors, including those using AI-powered deepfake technology, are exploiting these weaknesses, making robust cybersecurity measures more essential than ever.
KPMG recommends a proactive approach to managing these risks. This includes thorough supplier due diligence, rigorous contract reviews, and enhanced internal controls to prevent fraud. Additionally, businesses are advised to conduct cybersecurity risk assessments and adopt advanced technologies, such as blockchain, to strengthen supply chain security.
Employee training is another critical component of risk mitigation. Staff, particularly those in supply chain and accounting roles, should be educated to recognize the signs of fraud and cybersecurity threats. By combining strategic planning, technological innovation, and a vigilant workforce, Canadian businesses can navigate this turbulent trade landscape with greater confidence.
The tariffs could also have a broader impact on the Canadian economy, potentially weakening GDP growth and leading to higher unemployment rates. With exports to the U.S. declining and operational costs rising, many businesses are struggling to maintain profitability. This economic strain is compounded by the retaliatory tariffs imposed by Canada, which have raised the prices of U.S. imports and further disrupted supply chains.
In addition to these financial challenges, the rapid changes to supply chains have exposed businesses to new risks. Approximately 44% of Canadian businesses are already diverting exports through third-party countries, while another 44% are considering similar measures. While these diversions aim to mitigate the impact of tariffs, they also introduce vulnerabilities such as supplier fraud, contractual risks, and cybersecurity threats.
KPMG has highlighted the importance of thorough supplier due diligence to mitigate these risks. Businesses must verify the financial stability, reputation, and operational standards of new suppliers to avoid engaging with fraudulent entities. This includes scrutinizing contractual terms to identify hidden risks or fraudulent representations that could harm operations.
Cybersecurity risks are equally critical, as businesses shift to new or less secure suppliers. Sophisticated threat actors, including those using AI-powered deepfake technology, are exploiting these vulnerabilities. To address this, businesses are advised to conduct cybersecurity risk assessments and adopt advanced technologies, such as blockchain, to strengthen supply chain security.
Employee training is another key component of risk mitigation. Staff, particularly those in supply chain and accounting roles, should be educated to recognize the signs of fraud and cybersecurity threats. By combining strategic planning, technological innovation, and a vigilant workforce, Canadian businesses can navigate this turbulent trade landscape with greater confidence.
The Canadian government has introduced several measures to support businesses affected by the tariffs. These include financial support programs such as the Canada Small Business Financing Program and the Trade Impact Program, which provide funding to help businesses adapt to the new trade environment. Additionally, favorable loans are being offered through financial institutions like the Business Development Bank of Canada to assist impacted sectors.
Long-term strategies for businesses include diversifying markets and product offerings to reduce dependency on the U.S. This could involve exploring new international markets or investing in technologies to enhance supply chain resilience. However, these efforts require significant time and resources, placing additional pressure on companies with limited margins or capabilities.
Conclusion
The imposition of a 25% tariff on Canadian goods by the United States presents significant challenges for businesses in Canada. While rerouting exports through third-party countries offers a potential solution, it also introduces risks such as supplier fraud, contractual disputes, and cybersecurity threats. To navigate this complex environment, businesses must prioritize thorough supplier due diligence, robust cybersecurity measures, and employee training to mitigate risks. By adopting a proactive and strategic approach, Canadian businesses can enhance their resilience and adaptability in the face of these trade disruptions.
Frequently Asked Questions
What are the main risks of rerouting exports through third-party countries?
The main risks include supplier fraud, contractual disputes, and cybersecurity threats. Businesses may inadvertently engage with fraudulent suppliers or face vulnerabilities in their supply chains.
How can businesses mitigate supplier fraud risks?
Businesses should conduct thorough supplier due diligence, verify the financial stability and reputation of new suppliers, and scrutinize contractual terms to identify hidden risks or fraudulent representations.
What cybersecurity measures are recommended for businesses?
Businesses are advised to conduct cybersecurity risk assessments and adopt advanced technologies, such as blockchain, to strengthen supply chain security and protect against sophisticated threats, including those using AI-powered deepfake technology.
What government support is available for businesses affected by the tariffs?
The Canadian government offers financial support programs such as the Canada Small Business Financing Program and the Trade Impact Program, as well as favorable loans through institutions like the Business Development Bank of Canada.
What long-term strategies can businesses adopt to reduce dependency on the U.S. market?
Businesses can explore diversifying markets and product offerings, investing in technologies to enhance supply chain resilience, and adapting to new international markets to reduce dependency on the U.S. market.
