Navigating the Corruption Risk of Tariffs as Foreign Policy

As tariffs are increasingly used as foreign policy tools, companies are likely to quickly move sourcing from high-tariff countries to low-tariff ones. When this happens, companies and their emerging market suppliers face many new risks. For businesses attempting to understand and comply with evolving tariff policies, the policy changes can be an unexpected source of corruption and risk. Corporate compliance officers will face the challenge of anticipating challenges and preparing their organization for a new policy landscape and its pitfalls. Understanding the specific corruption challenges and opportunities arising from tariff policy changes will help compliance officers understand how to design and develop adequate due diligence, anti-bribery programs, and strategies that will strengthen their businesses.

The Impact of Rapid Changes in Tariff Policy      

 

Evolving tariff policies present new and unpredictable challenges for businesses as they shift supply chains to maintain their competitiveness. The unpredictability in tariffs and counter tariffs means firms may operate in a higher-risk environment. This leaves companies vulnerable to a range of integrity risks. Among these risks are spikes in facilitation payments, fraudulent documentation, and new schemes that take advantage of tariff related vulnerabilities.  

Compliance officers will provide the guidance needed to navigate this new and unpredictable policy landscape. Fortunately, many compliance teams have the tools to navigate these changes properly. The key will be refining those tools to strengthen internal controls and adapt to a continually evolving regulatory landscape. Here are four steps compliance teams can take to respond effectively. 

• Determine the impact of the new policy on your business and develop a strategy to adapt compliance controls to detect and mitigate risks.

• Provide regular education and updates on new policy changes for third-party vendors.

• Develop targeted training for the teams most vulnerable to rapid changes and develop a feedback mechanism for those closest to the heightened risks to seek guidance.

• Encourage collaboration by identifying cross-functional areas to collaborate and advise on risks and solutions. Collaboration between legal, compliance, and procurement teams will be critical to success during this period. 

Reinforce the Culture of Integrity and Cross-Collaboration

When there is rapid systematic change, corporate leadership determines a business’s ability to navigate the changes. This means that leadership must lead the way on ethics by taking a strong anti-corruption stance and signal the continuing importance of ethics and integrity. This will ensure they can contribute to a more transparent and fair business environment and remain profitable, even during chaotic change. Additionally, cross-sectoral collaboration will ensure that a business is not alone and understands the impact policy changes have on the sector while developing a sectoral-wide approach.

Ensuring integrity is centered in compliance will be critical to decreasing corruption risk amidst rapid tariff policy changes. Adapting existing compliance tools, reinforcing the culture of integrity, and cross-functional and cross-sectoral collaboration will ensure that most organizations will weather the storm caused by rapidly changing tariff policy. 

Michele Crymes

Anti-Corruption and Governance Expert