Supply Chain Resilience Dominates Boardrooms

Geopolitical friction is actively reshaping global trade, with 82% of supply chain leaders viewing it as a major risk and 78% expecting that risk to intensify. This has led to a significant shift in strategy, with 78% of companies reporting they have switched a supply chain provider specifically for a geopolitical advantage, such as avoiding tariffs or sanctions. The US-China trade relationship remains a primary driver of this uncertainty. Following a February 2026 Supreme Court ruling that invalidated the use of the International Emergency Economic Powers Act (IEEPA) for broad tariffs, the administration responded by imposing a new global tariff of 10-15% under the Trade Act of 1974. While a fragile truce was reached in late 2025, involving suspended tariffs and the easing of Chinese export controls on critical rare earth minerals, the trade environment remains volatile. In response, manufacturers are accelerating nearshoring and reshoring efforts. Mexico has now surpassed China as the top trading partner for the United States. In 2024, reshoring and foreign direct investment were responsible for the announcement of 244,000 new U.S. manufacturing jobs, with high-tech sectors like computer and electronics, EV batteries, and solar leading the growth. Regulatory pressures are also mounting domestically. OSHA has increased its focus on the manufacturing and warehousing sectors through its National Emphasis Program, conducting unannounced inspections focused on hazards like forklift safety, ergonomics, and fire protection. Penalties for violations have also increased, with willful or repeated violations now carrying fines up to $165,514 per incident as of January 2025. The Environmental Protection Agency is concurrently reviewing and potentially rolling back numerous regulations impacting manufacturers. This includes reconsidering emissions standards for vehicles and hazardous air pollutants, as well as rules governing emergency safety standards at facilities using toxic or flammable substances. For example, compliance deadlines for the National Emissions Standards for Hazardous Air Pollutants for iron and steel manufacturing have been repeatedly extended. For internal audit functions, this "polycrisis" environment demands a shift in methodology. Leading teams are now using geopolitical risk mapping to identify supply chain vulnerabilities and stress-testing business continuity plans against scenarios like the loss of key suppliers in volatile regions. This proactive approach moves beyond traditional compliance to provide assurance on the organization's overall resilience. Ultimately, manufacturing CFOs are focused on protecting margins amidst this volatility. Key priorities for 2025 include diversifying sourcing to reduce dependence on tariff-heavy regions, optimizing working capital to lessen reliance on debt in a high-interest rate environment, and investing in supply chain technology for greater visibility. Internal audit is positioned to add significant value by providing assurance that these strategies are effectively mitigating the complex web of geopolitical, regulatory, and financial risks.