A supplier disruption can increase costs twice: first through delays, then through a weaker pound. Start by mapping where your suppliers, payment dates and currency exposure overlap. This will show which interruptions could put the greatest pressure on margins.
Consider whether a broader supplier base or carefully chosen stock buffers would reduce operational risk. For currency exposure, forward contracts or options may help make sterling costs more predictable. The right approach depends on your cash flow, payment schedule and tolerance for uncertainty.
Decide how much exposure to hedge and who is responsible for reviewing that decision. Revisit the plan when suppliers, payment terms or trading conditions change. I advise growing businesses to treat this as a regular management decision, not a one-off response to disruption.
Spot Supply Chain Risks and Cost Exposure
Geopolitical shifts can affect your supply chain through sourcing, production, shipping routes and payment currencies. The key question isn’t only where you’re exposed, but what a disruption would mean for costs, cash flow and your ability to serve customers.
For each critical input, assess how dependent you’re on individual suppliers, how long replacements would take, and how sensitive costs are to tariffs or delays. Estimate the financial effect of a supplier shutdown or a prolonged interruption to transport. Where exact figures are unavailable, make your assumptions explicit and test how the result changes under different scenarios.
Currency movements matter too. If you pay in a foreign currency, model how changes in sterling could affect landed costs, margins and cash flow. Consider several exchange-rate scenarios, rather than relying on a single forecast.
Then rank the risks by likelihood and financial impact. Separate immediate threats from longer-term vulnerabilities, and decide what would trigger action. I advise growing businesses to use this analysis to prioritise diversification, identify practical alternatives and set clear thresholds for reviewing a supplier, route or currency exposure. The aim is to make decisions before a disruption reaches your operations.
Diversify Suppliers and Build Inventory Buffers
Once you have ranked your supply risks, reduce reliance on any one source by qualifying alternatives in different locations. Before moving orders, compare each supplier’s capacity, lead times, quality and exposure to disruption. Track the share of your spend going to each supplier and set clear limits on concentration.
Qualify alternative suppliers in different locations, compare their capabilities, and set clear limits on how much you rely on any one source.
Then decide how much extra stock to hold for critical inputs. Consider demand variability, replenishment times and the cost of a shortage. Keep a buffer where a shortfall could stop production; avoid tying up cash in items that pose little risk.
Review supplier performance and stock levels quarterly, and adjust allocations as conditions change. In my experience, the aim isn’t to eliminate risk, but to give your business practical alternatives while keeping service and working capital in balance.
—Angus Fleming, founder of Fleming Business Consultancy, London; former consultant to FTSE 100 and S&P 500 companies, now advising growing businesses worldwide.
Hedge Sterling Costs and Review Disruptions
If exchange-rate movements could erode your margins, consider hedging forecast sterling costs with forward contracts or options. Match the cover to payment dates and your tolerance for risk.
Track exposure by currency, supplier and settlement date. Each month, compare the rates you have secured with your budget assumptions. Set clear thresholds for renewing cover, and review them if demand or order volumes change. This can help prevent you from hedging more than you need.
Financial hedging is only part of the response. Assess whether alternative suppliers could reduce your exposure to sterling without increasing total landed costs.
Review disruptions quarterly and after significant changes to policy, shipping or trade. For each event, assess its effect on lead times, cash flow and currency translation. Use that assessment to update forecasts, hedge ratios and contingency plans.
Conclusion
Treat supply, currency and cash flow as one risk system. Map where sterling movements could affect costs or income, identify critical suppliers and consider alternatives. Hold buffers where delays would put service at risk.
Match any currency cover to the timing of expected payments, and review it when circumstances change. I advise growing businesses to track these exposures regularly, set clear thresholds for action and revisit them at least quarterly. The aim is to protect margins before disruption reaches customers.
This is general information, not financial, legal or investment advice.
