Re-thinking supply chain resilience

Key Points

1. Businesses are reassessing supplier concentration, geographic dependencies, transport routes and critical material exposure in response to geopolitical tensions, climate-related disruption, sanctions, tariffs and regulatory change.
2. Contracts are becoming a key resilience tool, helping organisations navigate, and thrive within, an uncertain global trade environment.
3. We offer practical and legal solutions to help businesses identify, cater for and respond effectively to emerging risks.

Rethinking supply chain risks

For many years, supply chain strategy focused on efficiency, cost optimisation and lean operating models. But the last few years have exposed additional risks associated with geographic concentration and supplier dependency. Businesses have faced successive shocks (including the COVID-19 pandemic, the war in Ukraine, disruption in the Red Sea and Strait of Hormuz, semiconductor and critical minerals shortages, sanctions regimes and changing tariff policies), all of which have highlighted vulnerabilities in received global supply chain management.

On 15 June 2026, the UK Government published a report, ‘Global supply chains: a foresight report on risk and resilience’. Looking ahead to 2040, it examines how geopolitical fragmentation and environmental change may shape supply chains. The report explains that supply chains shouldn’t be viewed as linear customer-supplier relationships, but as complex multi-tier networks in which vulnerabilities frequently sit several levels upstream of direct contractual counterparties. It notes, in particular, that climate change and geopolitical instability increasingly operate as risk multipliers, amplifying one another, and that’s certainly something we’re seeing in practice. For more on making your contracts climate-ready, see our earlier article, Why food manufacturers need climate-ready contracts.

In this article, we consider key practical and contractual strategies to help businesses shore-up their supply chains, despite emergent and evolving risks.

Supplier diversification

A key trend over recent years has been businesses moving away from concentrated sourcing models towards greater diversification. Effective measures can include dual or multi source procurement, regional sourcing, nearshoring, qualification of alternative suppliers and targeted inventory buffers.

Diversification, however, requires more than adding names to an approved supplier list. For example, alternative suppliers may depend on the same manufacturer, material, port or technology platform. It’s therefore important for businesses to establish whether diversification genuinely reduces concentration risk, and whether substitute suppliers could be activated quickly.

Contract terms should support that strategy. Relevant provisions include supplier onboarding and approval, substitution rights, subcontracting controls, exclusivity, minimum purchasing commitments, stockholding, priority or allocation during shortages, business continuity and contingency planning.

Exclusivity and minimum-volume commitments can provide price certainty and encourage investment, but they may also restrict rapid re-sourcing.

The commercial objective should be to balance commitment with sufficient flexibility across all relevant terms, to enable the business to respond when conditions change.

Understanding critical dependencies

For many businesses, strategic dependencies arise from semiconductors, steel, copper, lithium, rare earth processing, fertiliser, energy-intensive inputs, or specialist manufactured products. The risk may sit in extraction, processing, logistics or infrastructure, or with the ultimate counterparty supplier.

As such, businesses should map critical inputs beyond Tier 1 suppliers. They should identify bottlenecks and chokepoints, assess country and route concentration, and understand realistic lead times for switching supply. Contracts can support this through obligations to disclose key sub-suppliers, notify changes to critical routes or sources, maintain records, participate in audits and preserve alternative sourcing arrangements.

Ideally, the critical inputs mapping exercise should be proportionate to the risk posed by each supplier. Priority should be given to relationships whose failure would materially affect production, fulfilment, regulatory compliance, customer commitments or financial performance.

Cybersecurity as a critical supply chain risk

Cybersecurity is now an increasingly prevalent, and an increasingly serious, supply chain risk.

A cyber incident affecting a logistics provider, software supplier, outsourced service or product provider or operational technology platform can significantly interrupt production and fulfilment even where a business’ own systems remain secure.

The UK Government’s Cyber Governance Code of Practice  places supplier risk within board-level cyber governance. It advises organisations to routinely assess supplier information in proportion to risk, and to ensure resilience to cyber risks arising from supply chains and business partners.

Contracts should anticipate and cater for the potential operational consequences of a supplier cyber incident. This may include minimum security standards, evidence of compliance, audit and testing rights, prompt incident notification, cooperation obligations, recovery plans, data protection provisions and clearly allocated liability. Requirements should be risk-based and capable of being monitored, rather than broad promises that are difficult to verify.

Regulatory compliance

Regulatory compliance across supply chains has become a key area of focus, and this is a trend that looks set to develop and grow.

Businesses should therefore seek greater visibility over product traceability, carbon and sustainability data, modern slavery and human rights risks, building safety requirements, sanctions and other trade controls. A challenge is that information may sit deep within complex supply chains and collecting reliable supplier-specific data can be resource intensive.

Contractual frameworks and protections can help – increasingly including compliance warranties, reporting obligations, information-sharing requirements, audit rights, flow-down obligations and indemnities for defined breaches.

Remedies should be considered and designed carefully. Immediate termination may protect a business in some cases, but it may also worsen disruption or undermine remediation. Businesses may, instead, wish to consider a staged response, using investigation, corrective action plans, enhanced monitoring, suspension or step-in rights before termination where appropriate.

Rethinking force majeure and contractual flexibility

 Repeated disruption has led businesses and insurers to question whether events such as war, sanctions, export controls, transport interruption, pandemics and extreme weather should always be treated as exceptional.

It’s also important to remember that, under English law, force majeure has no standalone meaning, so the wording of the contract is critical.

Businesses should consider or review the definition of force majeure in every commercial contract, the required effect on performance, notification and mitigation duties, the duration of relief, allocation of available stock, rights to source elsewhere, and suspension or termination triggers. These provisions should align with any exclusivity, minimum purchase, service level, allocation of supply and business continuity clauses.

Force majeure and contractual flexibility options should also be considered alongside mechanisms addressing commercial hardship rather than impossibility. Change-control procedures, index-linked or event-driven price adjustments and structured renegotiation clauses can provide a route to preserve long-term relationships when costs or regulatory conditions change substantially. For more on force majeure, frustration and other options for flexibility, see our earlier articles, Managing supply chain disruption, Extreme weather puts manufacturing contracts under pressure – Manufacturing Management

Practical resilience

 For many businesses, a practical resilience programme can be organised around three recurring steps:

• First, identify where risk sits. Map critical suppliers beyond Tier 1, including key materials, sub-suppliers, technology dependencies, transport routes and areas of geographic concentration.

• Second, design targeted responses. These may include genuine supplier diversification, proportionate inventory buffers, alternative routing, improved supplier due diligence, business continuity plans and contractual rights to obtain information, audit, substitute, suspend, step in or terminate.

• Third, stress-test and update. Model plausible disruption scenarios, test whether alternative suppliers can perform, check whether relevant teams can access the contracts and information they need, and review whether all relevant contracts and contractual provisions work together. Assign responsibility for monitoring geopolitical, cyber and regulatory developments and for escalating emerging risks.

How we can help with supply chain resilience and restructuring

Resilience doesn’t mean eliminating all risk or carrying unnecessary cost. It means understanding which dependencies matter most, then investing in proportionate flexibility, visibility and recovery capability.

 The businesses that treat their supply chains as interconnected networks will be best placed to respond to ongoing and emerging challenges. That requires clear governance, better information and contracts designed for disruption as well as ordinary performance. The strongest arrangements combine commercial commitment with practical options to investigate, remediate, diversify, renegotiate and, where necessary, exit.

The last few years have shown that no business can predict every shock. However, with the experience and expertise that comes from working closely with clients across different sectors and at different tiers within global supply chains, our Commercial Services team can help businesses to withstand, and even thrive within, an uncertain geopolitical and trade environment.

We routinely help clients build sufficient visibility and flexibility into their contractual arrangements to enable them to make informed decisions quickly, to protect continuity, and to preserve valuable commercial relationships when conditions change.

In particular, we can assist with:

• drafting, reviewing, stress-testing and renegotiating contracts and terms across national and international supply chains
• mapping supply chain risks and designing targeted responses
• creating contract frameworks that balance resilience, flexibility and commercial certainty
• developing supply chain governance frameworks
• implementing supplier due diligence and monitoring programmes
• designing business continuity and contingency planning arrangements
• managing and resolving disputes arising from supply chain disruption.

Whether you’re navigating immediate disruption or simply looking to strengthen your contracts in light of emerging risks, please contact us for clear, pragmatic advice, tailored to your commercial priorities.