Managing supply chain issues resulting from sanctions

Global supply chains continue to be disrupted in light of shortages of raw materials, staff and the global pandemic. The Russian invasion of Ukraine, together with the sanctions imposed on Russia will continue to impact and have longstanding effects on global supply chains.

The sanctions could have unexpected effects on manufacturing, distribution, logistics and finance which are not too dissimilar to the current issues and strains on supply chains.

Sanctions

There are, of course, a number of freezes affecting suppliers and customers that a business can trade with and make payment to, including banks. UK businesses will need to remain diligent as to who they can enter into contracts with – as falling foul of this can be a criminal offence, not to mention the possible reputational damage.

Cyber attacks

We are all likely to be aware of the potential for cyber-attacks from Russia. Organisations should continue to focus on cyber security basics, as opposed to drastic reactive measures. Cyber-attacks can be prevented through the implementation of policies and procedures to shape the approach to system security. These should be ingrained within your organisation.

Time disruptions

Following the pandemic, businesses should now be well prepared in relation to supply chain issues causing delays in sourcing raw materials or supplying customers. The sanctions may well result in delays and disruptions in and around Russia. Delivery dates may not be met and products may take longer to reach their final location as a result.

Check your terms. If delivery or performance dates are estimates only, a supplier will have the flexibility to negotiate alternative delivery dates which they may have greater capacity or flexibility to fulfil.

Performance of obligations

Linking to the point above, businesses should be aware of sanctions preventing them from performing a contract, as is discussed in more detail in this newsletter. At the very least, businesses should check to see what their contractual position is in relation to to suspending or delaying their performance or terminating an agreement if a business is genuinely prevented from meeting their obligations by circumstances outside their control.

Check in on those around you

Finally, and not strictly linked to ‘commercial contracts’ but perhaps most importantly, there may well be individuals in your organisation and indeed your supply chain who will be affected due to the ongoing conflict, or may have friends and family who reside in the country. Reaching out to offer support will go a long way and may just help those around you affected by these events.