GLOBAL supply chain operators need to be aware of a “sea of sanctions” heading their way and take meaningful action to avoid finding themselves on the wrong side of the law.

“Breaches of financial and trade sanctions can be serious criminal offences,” said Julia Grainger, head of compliance and international trade at security consultancy Universal Defence & Security Solutions.

“If you’re very unfortunate they can carry a maximum sentence of seven years in prison or a fine.”

It was critical for businesses to look at how each set of sanctions would affect different sectors and how they might affect their supply chains and finances, she told a webinar.

“Businesses need to be reviewing supply chains for areas of risk,” he said. “They really need to understand who their customer is, where they are and what they do. They must understand their products, to the point of checking commodity codes and finding out what the new export and import licensing requirements are.”

This meant understanding the entire “trade journey”, as well as who the supplier was, and potentially what other sources of supply were available.

“The assumptions, practices and processes that were in place up until a couple of weeks ago have shifted,” said UDSS executive advisor David Shouesmith. “From a supply chain point of view, there are nuances depending on sectors, but most will be affected both on the supply and demand side.”

There had already been a fall in demand from the Russian market as trading with the country became more difficult and the Russian economy contracted.

Russia’s relatively small economy meant that that slowdown would not result in an impact on multinational companies but it would take “a bit of adjustment,” said Mr Shouesmith. “On the supply side, there will be a spike in prices following the sanctions on oil and gas. But there will be challenges around agricultural supplies from Ukraine that will need long-term adjustments.”

Moreover, there was still much uncertainty around the possible outcomes of the invasion of Ukraine and Russian strategy for the war, and businesses would have to manage this uncertainty.

“In terms of the supply and demand side tensions, I think we will see businesses continue to manage these as and when issues arise,” he said. “Transportation is usually a race to the bottom in terms of price. But I think we’ve got to look at investing in supply chain resilience.

“That may mean having more stockpiles of inventory or going broader in the supply base. Businesses in physical supply chains do need to invest in inventory and put some time and effort into onshoring or nearshoring.”

Doing nothing, however, was not an option.

“Some businesses are holding their breath and hoping this will return to normal — that ain’t going to happen,” Mr Shouesmith said.

As well as accepting additional costs, it was worth investing in understanding the markets companies sell into and their supply chains, he added.

“Sanctions are definitely a part of that,” he said. “You have to invest in enough knowledge to not compromise your business by breaching sanctions, and to know the levers that can be pulled to add resilience.”

To de-risk physical supply chains meant adopting a “contingent mindset” that expected things to go wrong. That was a key part of understanding risk in supply in an uncertain world, he said.