Moody's claims that it can be difficult to evaluate and manage supplier risk, particularly in sectors where there are few suppliers, such as semiconductors and electronic vehicles. Because of this dependence, businesses are less able to diversify their supply chains or discover alternatives, which makes them more susceptible to disruptions.

The ability of a business to tolerate interruptions and bounce back can be seriously jeopardized by visibility—or lack thereof—over supply networks. Companies run the risk of supply delays, reputational harm, and unanticipated costs from changes in the economy, political upheaval, or black swan occurrences if they do not have access to critical financial data and analysis.

Companies working in sensitive industries or areas where there is a significant risk of forced labor must strictly comply to human rights due diligence (HRDD) rules. One example of this is the solar business, which heavily relies on the Xinjiang Uygur Autonomous Region. Insufficient supply chain data has exposed the solar business to hazards, according to a paper from Sheffield Hallam University.

In order to comply with legal requirements and preventatively limit risks, regulatory frameworks such as the German Supply Chain Act in Europe and the Uyghur Forced Labor Prevention Act in the US highlight the significance of supplier monitoring and due diligence.

Moreover, Asia is seeing a move toward required reporting and compliance as South Korea and Japan are leading the way in pushing HRDD and environmental due diligence.

Businesses need to use automated technologies for comprehensive risk management and conduct extensive supplier due diligence and risk monitoring in order to manage these complexity. For instance, Moody's helps businesses evaluate and reduce third-party risks by providing solutions that address regulatory compliance, fraud risk, ESG issues, and financial stability.

By using a risk-based approach to supply chain management, companies may effectively predict, evaluate, and reduce risks. This eventually safeguards the supply chain against today's complex risks by improving operational resilience and guarding against non-compliance fines and reputational damage.