Navigating Disruption Risk

Disruption risk is the potential for unexpected events that can interrupt or significantly alter an organization’s operations, market position, or strategic direction.

Disruptions can be caused by factors such as technological advancements, market shifts, regulatory changes, natural disasters, or other unforeseen events. The potential impact ranges from minor operational hiccups to significant threats to sheer survival.

Such is the case with tariffs.

In today's complex global economy, board directors are facing unprecedented challenges, including the looming threat or reality of international tariffs. Tariffs can impact everything from supply chains to profitability, requiring a proactive and strategic response.

As a board director, you have a crucial role to play in guiding your organization through these turbulent times.

Whether you serve on the board of a large business, non-profit, government agency, public company, or charity, you can be sure the pressure to navigate disruption is being felt keenly by your CEO and management team.

That leads us to the question — what do CEOs need from their boards right now?

This edition of The Savvy Director will explore how you can contribute to the solution by offering insights, strategic questions, and action steps to help your organization navigate the potential impacts of tariff disruption.

We’ve tried to make the content relevant to your local situation. At the same time, we encourage you to adapt it to fit what’s needed in your particular sector of the economy.

Let’s start with a common understanding of the fundamentals at play.

Understanding the Threat of Tariffs

Tariffs are taxes imposed by governments on imported materials and goods. While they’re often used as tools for economic policy, tariffs can disrupt international trade, increase costs, and create uncertainty for businesses and non-profits. For organizations with global supply chains or significant international markets, the threat of tariffs can pose a substantial risk.

Unlike the COVID pandemic, when supply chains were disrupted due to the lack of availability of imported materials and goods, tariffs create barriers due to significantly higher prices on imports.

As this article is being written, news headlines are changing daily. We’re dealing with the instability and uncertainty of just not knowing what’s coming next and when it will happen. So, what can we actually control?

Savvy directors can control how they support management by proactively mitigating disruption risk using evolving information in real time. There are challenging discussions and decisions ahead.

Your Role as a Board Director

Your primary responsibility is to provide governance oversight, insight, and foresight to help ensure your organization’s long-term success and resilience. This includes staying informed about the current economic and political landscape, understanding the specific risks and opportunities that tariffs may present, and working collaboratively with your fellow directors and the management team to develop and implement effective strategies.

In some cases, the situation will call for additional meetings, so get out your calendar and plan for them!

Staying Informed and Engaged

To effectively contribute to the solution, you must stay informed about tariff scenarios and their implications for your industry, even if they're not readily apparent. This means reviewing economic reports, engaging with industry associations, and staying up-to-date on policy developments.

With a deep understanding of the external environment, you can provide valuable insights and suggestions during board discussions.

Contingency Plans

One of the key responsibilities of a board director is to ensure that the organization is prepared for various risk events.

Board members can leverage their networks to work with management to develop contingency plans that address potential supply chain disruptions, increased costs, and other challenges. Comprehensive plans should cover everything from alternative sources to financial modeling.

Immediate impacts include increased costs for imports, delays in supply chains, and reduced competitiveness in foreign markets. Non-profits and charities may face challenges in sourcing goods, increased operational costs, and potential reductions in donor and sponsor funding.

In the longer term, disruption may create opportunities. Among the changes you might anticipate are shifts in global trade dynamics, changing supplier relationships, relocation of manufacturing operations where regulation permits, potential for new markets, or opportunities to innovate.

Networks, Expertise, and Experience

You bring a wealth of contacts, expertise and experience to the board table. Your insights are valuable in identifying downstream risks and opportunities, evaluating strategic options, and guiding the organization through uncertain times.

By actively participating in board discussions and offering your perspective, you can help shape the organization's response to the threat of tariffs. Leveraging the power of your network helps discover who has resources, how to build strength in numbers, share ideas, and explore business models.

You have a part to play in rallying the team into action and advocating for what the organization needs, so that you help direct the team’s energy into something productive and useful.

Strategic Questions to Guide Discussions

To effectively address the threat of tariffs, it’s essential to ask insightful questions that can help uncover potential risks, explore strategic options, and ensure the organization is well-prepared. Here are some key questions to consider:

• What is our current exposure to tariffs? Which areas of the business are most at risk? Understanding where you are most vulnerable is crucial. It requires analyzing the supply chain, identifying key suppliers and markets, and assessing the impact on operational costs.
• What contingency plans do we have in place to mitigate the impact of tariffs on our supply chain and overall operations? Contingency plans could include diversifying suppliers, exploring alternative sources, and building flexibility into the supply chain.
• How are we engaging with policymakers and industry associations to advocate for our interests and stay informed about policy changes? Activities such as participating in industry forums helps to build relationships with key stakeholders and stay updated on new developments.
• What financial models and scenarios have we developed to understand the impact of tariffs on our revenue and costs? Increase your understanding of the risk by analyzing various scenarios, assessing the impact of tariffs on costs and pricing, and identifying potential mitigation strategies.
• How are we communicating with our stakeholders, including investors, customers, and suppliers, about the potential impact of tariffs and our plans to address them? Effective communication is critical during times of uncertainty. Maintaining trust with your stakeholders by providing regular updates and being transparent is crucial in uncertain times. Consider this as non-negotiable.

A structured approach to addressing complex risks can help management feel more confident and prepared. By covering strategic guidance, financial oversight, and supply chain resilience, a plan ensures that all critical areas are addressed.

Developing and implementing the plan will require time, intense effort, and significant resources. The need for continuous monitoring through regular reviews and updates will add to everyone’s workload. Effective execution of the plan will require close collaboration between the board and management, which can be time-consuming.

To make the approach more manageable, consider the following:

• Prioritization: Focus on the most critical areas first and gradually expand to other aspects.
• Delegation: Distribute the workload. Assign specific tasks to different committees, teams, or individuals.
• Regular Check-ins: Schedule regular but concise check-ins to monitor progress. Make adjustments as needed.

Take heart knowing that we’ve had to mitigate disruption risk before and found ways to collaborate in all of our organizations, large and small. It wasn’t all that long ago our boards needed to come together with management to manage the emerging risks of the pandemic.

Before we wrap up, I want to share the perspective of a board chair who is deep into the process of managing disruption risk for two very different organizations.

A Board Chair’s Perspective

Bernie Uhlich is the Board Chair of the National Institute of Supply Chain Leaders (NISCL) as well as the Board Chair of Georgian Bay General Hospital in Ontario, Canada.

When I interviewed Bernie for this article, I learned about the collaborative war room mindset developing between boards and management teams to protect organizations with hundreds of employees and millions of dollars at risk.

While your boards may serve smaller entities with less dollar volume and lower employee headcount, the potential for collateral damage from tariffs shouldn’t be underestimated.

When asked what CEOs need from their boards right now, Bernie focused on the board’s ability to provide the intel and visibility of the geopolitical environment, and to share with their CEOs what they know about how the integrated system will react.

Relationships matter. Bernie advocates using the power of each director’s network for support and stakeholder advocacy. Stay connected. Be informed. Cultivate industry, government, and stakeholder problem-solving working groups, and bring the information back to your boards.

Keep a laser focus on what the customer wants and needs during the ‘blitzkrieg attack’ on the viability of your business model. What short-term problem needs solving? What longer-term opportunities exist?

“This is a geo-political protectionist business strategy problem, not a natural disaster like COVID or a compliance exercise. We need a threat assessment and scenario simulations.

“After the initial analysis is done, who decides what, when, cost, and revenue impact? How does the board ensure the immediate doesn’t drive out the important?

“The CEO wants to know what their choices are and what latitude they have to pivot. They want to know if the board will support them in their efforts.

”The behavior required to manage a crisis means you lead like a general, behave like a politician. Fight a war and solve the problem. Complacency, comfort, and status quo are no longer options. Leadership means judgment and the ability to make decisions fast on pivot options.

“The CEO is looking for commitment, fortitude, tenacity, and resilience to take bold, courageous actions to fight for survival, win and grow.” — Bernie Uhlich, Board Chair, National Institute of Supply Chain Leaders

And what about Bernie’s other board? It governs a publicly-funded general hospital located in a beautiful rural area with an entirely different set of disruption risks that don’t involve cross-border trade. For this organization, tariffs will impact the price of imported medical supplies and other inputs, which may rise exponentially.

“Additional disruption risks include navigating funding challenges and recruiting and retaining critical resources such as doctors, nurses and other medical personnel. Our complex healthcare system requires Board-CEO collaboration in reviewing various scenarios and making strategic choices that target problems across multiple layers of government, other funders, donors, and key stakeholders.” — Bernie Uhlich, Board Chair, Georgian Bay General Hospital

For Bernie’s two boards, the stakes are quite different. In the hospital’s boardroom, the war room language is less extreme. And yet, the need for board and management to be well prepared for disruption is exactly the same.

Key Takeaways

• As a board director, you have a critical role in guiding your organization through turbulent times. Disruptive tariffs — including reciprocal tariffs — could present significant challenges for your organization.
• By staying informed, developing contingency plans, leveraging your expertise, and asking strategic questions, you can help your organization navigate disruption risk.
• Proactive and informed boardroom discussions are crucial in managing the disruption risk associated with potential tariffs.
• Boards should work closely with their management teams to gather essential information and develop both immediate and long-term response plans.
• Continuous monitoring, adaptability, and strategic foresight are key to navigating uncertainty and identifying opportunities. Think global, act local.

Resources:

The articles below have all been published post US Election 2024. The first item by veteran boardroom advisor Ram Charan is the most recent and provides a helpful, big picture context for all boards to consider when adjusting their mindset.

• Trump Trade War: Strategies and Opportunities. Ram Charan. Corporate Board Member. February 2025.
• The Impact of Potential Tariffs: How to Get Your Business Ready. Business Development Bank of Canada (BDC). January 2025.
• Supply Chain Disruption and How to Manage It. Dan Byrne. Corporate Governance Institute.
• Tariffs Prompting Supply Chain Changes. KPMG. February 2025.
• Tariffs on the Move: A guide for CEOs for 2025 and beyond. Cindy Levy, Matt Watters, and Shubham Singhal with Isabella Bennett. McKinsey & Company. December 2024.
• Tariffs and the supply chain: Navigating the ripple effects of economic policy. Fayne Baker. Kinaxis. February 2025.
• Supply Chain Strategies to Mitigate Tariff Risks. © 2025 Supply Chain Today.

Thank you.

Scott

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online membership with practical tools for board directors who choose a growth mindset.

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