If the past several weeks have taught us anything about the ongoing tariffs discussion, it's that none of us can accurately predict the future, not even tomorrow.
With the status of tariffs on goods imported – particularly from China, Canada, and Mexico – subject to further changes, delays, and retaliations, business leaders are scrambling to safeguard their operations against the rising costs these tariffs impose.
However, any significant decisions made in the current climate carry the risk of long-lasting impacts, forcing finance chiefs to navigate a rapidly shifting landscape based on rules that fluctuate daily. The volatile tariffs landscape impacts areas across finance and accounting, including cost of goods sold, inventory management, reporting and compliance, tax planning, integrated business planning, forecasting, cost optimization, and risk management.
Furthermore, the Economic Policy Uncertainty Index recently foundopens in a new tab that consumer uncertainty regarding the intersection of economics and politics is at its highest level since the pandemic – an alarming trend that promises to significantly affect consumer purchasing habits. Unfortunately, the combination of sporadic consumer spending and business-level uncertainty spells trouble for the economy.
However, all hope is not lost. In the throes of financial planning for a very uncertain year, CFOs can take preventative measures and proactive steps to ensure they're able to adapt quickly to changes in demand and regulatory status. Let's take a look at a few of the most important.
Explore risk management scenarios
A CFO's role in tariff risk management goes beyond just financial oversight. It requires a multilayered approach involving collaboration with multiple functions within the organization, such as supply chain, compliance, operations, and government relations. CFOs can safeguard their organizations against both direct and indirect tariff-related risks by implementing comprehensive risk identification and mitigation strategies (both for financial risks and operational resilience) and continuous monitoring of the risks.
There are two types of risk mitigation strategies: financial and operational. On the financial side, CFOs should consider:
- Diversified sourcing to shift to suppliers in non-tariff regions
- Tariff engineering to minimize duty rates legally
- Currency and commodity hedging to offset price volatility
This will include looking at how inflationary pressures and currency fluctuations may impact inventory valuation as well as working with auditors to revisit disclosure requirements to ensure transparency in financial statements regarding tariff-related risks.
Equally important are operational risk management scenarios, such as:
- Expanding geographically to offset losses from tariff-heavy regions
- Balancing stock levels to avoid tariff-driven supply shocks
- Tracking regulatory compliance to stay updated on evolving policies
Additionally, third-party risks and fraud are expected to increase as supplier networks shift, necessitating enhanced due diligence in vendor onboarding. Companies must strike a careful balance between mitigating tariff-related cost pressures and maintaining compliance with evolving regulatory and tax requirements.
With every approach, CFOs should develop "what-if" scenarios to model the impact of different tariffsopens in a new tab on the business, leveraging dynamic risk assessments to evaluate the resilience of their current risk and control frameworks.
These scenarios include key risk indicators such as the cost impact, working capital efficiency, and profit margin stability to monitor risk and trigger appropriate responses. This means that the adoption of AI-driven analytics and continuous risk monitoring solutions is no longer optional but essential for maintaining agility and foresight in today's rapidly evolving risk landscape. By tracking these risks, CFOs can provide regular updates and transparent communications on mitigation efforts to the rest of the C-suite and their board.
A streamlined approach to business planning
Integrated business planning has become a critical approach to providing a robust baseline for decision-making and keeping all teams collectively aimed at the same corporate objectives while staying focused on individual key performance indicators. As it relates to tariffs, finance teams should collaborate closely with supply chain teams to ensure cost and pricing strategies are closely aligned.
Here are just a few ways these teams can work together to reduce the impact of tariffs:
- Examine alternative suppliers in non-tariff or lower-tariff regions
- Negotiate better terms with existing vendors
- Explore additional avenues for cost reduction and efficiency to offset increased input costs due to tariffs
- Develop agile pricing strategies to absorb the costs of tariffs or pass them onto customers on a case-by-case basis
- Respond to customers wanting to bring forward orders to get ahead of tariffs, and similarly, source and warehouse in advance for near-term needs
- Assess tariff recovery strategies (e.g., importing a good from Mexico and then shipping it to another country like the UK to recover the tariff paid)
By maintaining a close relationship with other teams that have an impact on financial performance, CFOs can protect themselves against isolation and siloed decision-making.
Tighter budgetary controls
One of the most impactful levers CFOs can pull is closely monitoring and managing spend to ensure it aligns with a set budget. Investing in technology tools that enable granular tracking across cost centers and regions is one way finance chiefs are becoming more ingrained in the day-to-day finance of the company.
Take, for instance, agentic AI – an emerging and invaluable resource for CFOs. While traditional AI operates primarily on specific algorithms and set rules, agentic AI operates autonomously to make decisions and pursue goals, asking for human guidance when needed.
This advanced technology helps finance chiefs proactively identify and trigger suggested responses to crises and issues that may emerge. Agentic AI can auto-trigger alerts based on trajectory views and changing macroeconomic conditions with suggested next steps, allowing the end user to act quickly on the recommendation.
Continuous accounting practices
Finance chiefs should investigate continuous accounting practices that eliminate the gap between business transactions and accounting dates. This allows the business to instantly record and understand the impact of each transaction, building resilience overall and instilling confidence and agility in decision-making. In addition to improving the accuracy and efficiency of accounting practices, this approach also provides more real-time visibility to help ensure compliance with changing regulations and financial performance.
There are several areas where accounting practices are involved that finance chiefs need to consider. For example, tariffs will have an impact on transfer pricing driven by margins on intercompany sales of goods and profit elimination. However, any transfer pricing policy changes come with a risk of notices from the respective tax authorities. CFOs must maintain thorough documentation of all tax positions and related uncertainties caused by tariff changes to mitigate tax disclosures and transfer pricing risks.
The ongoing discussion around US tariffs on businesses outside of the US is going to have wide-ranging and long-lasting impacts on the US economy. And while experts attempt to stay ahead of the conversation to understand what's coming down the line, perhaps the most important takeaway is that the future is uncertain and open to change.
For this reason, CFOs need to invest in business practices and technology that improve visibility into other departments, especially the supply chain, and closely monitor changing regulations. When the future is uncertain, the ability to adapt to new policies and events is critical, and CFOs who fail to understand this will be at a disadvantage for months, years, and decades to come.
This article was first published in CFO.comopens in a new tab.
