Ensuring trade compliance in the rapidly shifting global trade environment is creating headaches for business leaders as they scramble to mitigate new risks. That’s fueling a high demand for trade compliance professionals and boosting the growth of global trade management (GTM) software.
But within all the chaos, some see a silver lining in both tariff volatility and the trade compliance challenges it creates.
Experts from global consulting firm Gartner say companies can leverage tariff volatility for their benefit.
“Enterprises should recognize tariff volatility as a multiyear, dynamic event,” said Suzie Petrusic, Senior Director Analyst in Gartner’s Supply Chain practice in a statement. “Chief supply chain officers (CSCOs) who recognize this reality should continually evaluate opportunities to invest in strengthening their operations and attract outside investments from geopolitical actors and ecosystem partners.”
“CSCOs who anticipate that current tariff volatility will persist for years, rather than months, should also recognize that their business operations will not emerge successful by remaining static or purely on the defensive,” added Brian Whitlock, Senior Research Director in Gartner’s Supply Chain practice. “The long-term winners will reinvent or reinvigorate their business strategies, developing new capabilities that drive competitive advantage …”
The results of a recent Descartes study seem to confirm Whitlock’s advice.
The competitive advantage of trade compliance
In a March 17 announcement, Descartes Systems Group — which touts itself as the “global leader in uniting logistics-intensive businesses in commerce” — released findings from its study, Top Three Traits of Companies with a Successful Approach to Trade Compliance.
With the survey of 887 corporate decision makers in international trade compliance and/or supply chain intelligence across Argentina, Benelux, Brazil, Canada, China, Denmark, Finland, France, Germany, India, Japan, Mexico, Norway, Sweden, UK and USA, Descartes and SAPIO Research aimed to:
- “Understand the strategies, tactics and technologies used by companies involved in international trade to help gain a competitive advantage and ensure continued business growth”
- “Identify if these varied by factors such as country, industry, company size and business growth”
According to the results, “39% of fast-growing companies (those expecting greater than 15% growth over the next two years) consider trade compliance to be a competitive advantage and not only a regulatory requirement, compared to 22% of slower-growing companies (those with less than 5% growth expectations).”
The critical role of technology
The Descartes study also underscored the important role of technology in trade compliance, with 57% of companies surveyed indicating a belief that technology is “also very or extremely important for competitive advantage in trade compliance strategies.”
That was especially true for “growth businesses” versus “non-growth companies.”
Descartes said nearly three quarters (72%) of fast-growing companies view technology as a “valuable competitive differentiator,” compared to “just 41% of businesses predicting shrinking, limited, or no growth.”
“The study also revealed that 86% of fast-growing companies indicated technology is fundamental or highly important to growth strategies,” the firm explained. “Underscoring a strong link between technology, business expansion and trade compliance, 47% of fast-growing companies confirm investing in technology is the top approach to tackling international trade challenges—compared to just 18% of those expecting shrinking, limited, or no growth.”
In a recent Logistics Management article, Bridget McCrea, Editor at Large for Modern Materials Handling and a Contributing Editor for Logistics Management, also emphasized the growing role of technology in global trade.
“Amid shifting trade requirements, evolving tariffs, and the threat of trade wars, shippers are leaning on global trade management (GTM) solutions to automate compliance and navigate an increasingly unpredictable business landscape and vendors are responding to their needs,” McCrea wrote.
She noted that GTM offers “end-to-end visibility” and “control” over processes related to international trade with capabilities that include:
- Import and export compliance
- Customs management
- Trade finance
- Logistics
Such capabilities help organizations “navigate trade requirement complexity, comply with international regulations, minimize risk, save money (on fines and duties), and optimize their global supply chains,” McCrea explained.
The need for a “well-resourced” compliance team
Another differentiator for higher-growth companies revealed in the Descartes study? A focus on building a “well-resourced compliance team.”
Companies expecting more than 15% growth over the next two years allocate an “average of eight people to trade compliance activities, compared to six people in companies anticipating shrinking, limited, or no growth.”
“Given the volatility of the current trade landscape, rife with evolving tariffs, trade barriers, sanctions and regulations, effective and efficient global trade compliance is a distinct competitive differentiator,” said Jackson Wood, Director, Industry Strategy at Descartes. “Companies that invest in building their compliance teams view compliance as a strategic advantage. They leverage leading technologies to turn compliance into an engine for growth while creating more resilient supply chain operations.”
A comprehensive approach is key
In their recent article, “As Protectionism Grows, Trade Compliance Matters More Than Ever,” experts from global consulting firm BCG underscore the importance of a comprehensive approach that includes key players across the enterprise.
Describing evolving trade rules as a “top-line risk” for businesses, they underscore the need for leaders to look beyond tariff costs created by geopolitical squabbles to evaluate “deeper threats, which can inflict far greater damage through sudden market exclusions, supply chain disruptions, or operational shutdowns.”
“Leaders must gain a clear understanding of their trade flows, including which goods and associated services move between which locations,” they write. “And they must consider how they are affected by trade restrictions, so they can steer compliance efforts and adjust risk mitigation strategies accordingly.”
To do so, they say a coordinated approach is needed that “recognizes that trade compliance touches every stage of the value chain.”
“Companies that break down silos and coordinate compliance across all functions can catch problems early, often avoiding hefty fines or shipments stuck at borders,” the experts explain. “This enables them to closely monitor regulatory changes and make sure information is shared rapidly between functions and allows for rapid adjustments to compliance processes.”
Four “critical actions” for success
In this context, the BCG experts describe “forward-looking organizations” as those which recognize the need for compliance to be “designed in, not simply layered on.”
“To stay ahead of sanctions, export controls, and trade complexity, leaders must empower cross-functional teams, align technical and legal capabilities, and make trade compliance part of the digital backbone of the business,” they write. “That is the only way to transform compliance from a source of risk into a driver of strategic control, operational speed, and long-term resilience.”
To do so, they describe four “critical actions” that must be deployed across the organization:
- “Elevate trade compliance to a top-tier risk and governance priority.”
- “Integrate compliance into core processes and product design.”
- “Leverage technology for real-time monitoring and control.”
- “Design compliance into the company’s digital backbone.”
“Proactive trade compliance is now a strategic imperative,” the experts say. “It not only averts the rising consequences of inaction but also protects a company’s ability to operate globally and maintain credibility with customers, regulators, and investors.”For additional detail, please see the full article, “As Protectionism Grows, Trade Compliance Matters More Than Ever.”
