Last year, the United Nations referred to uncertainty as ‘the new tariff’, noting that global trade was being reshaped not just by tariffs or geopolitical tensions but also by policy unpredictability. The veracity of this comment has been underlined by recent events in the Middle East where lack of clarity around access to one of the world’s busiest oil shipping channels has caused supply chain chaos.
In the world’s fourth largest economy, the elongation of the supply chain caused by this disruption is being felt by businesses of all kinds explains Amit Baraskar, Senior Vice President & Head Group Treasury at Thomas Cook India.
“Exports to the Middle East have been disrupted with a subsequent slow-down in remittances,” he says. “Energy shortages are translating into supply chain shortages in multiple industrial and services sectors.”
The conflict is also reshaping the supply chain for non-energy and critical inputs. “Re-routing tankers and container ships raises freight and insurance costs and lengthens delivery times,” adds Baraskar. “Longer food supply chains eventually translate into socio-political problems for low-income countries where food constitutes almost a third of total consumption.”
While recent geopolitical upheaval has impacted supply chain finance, it is just the latest in a series of developments that have changed how companies manage liquidity. Tariffs were the first catalyst and they continue to matter, but they are now part of a broader operating environment that includes conflict risk, commodity volatility and more complex logistics.
A recent survey of clients conducted by Citi showed that tariffs alone are absorbing around 6% of incremental working capital. In practical terms, that means a measurable amount of liquidity is tied up earlier in the trade cycle before companies even start thinking about inventory optimisation or financing efficiency. As a result, many corporates are becoming more conservative in how they deploy cash.
“Transit times are longer, insurance and freight costs are significantly higher, and commodity prices remain volatile,” agrees Adoniro Cestari, Head of Trade and Working Capital Solutions at Citi. “That pushes companies to think less about short‑term optimisation and more about resilience, optionality and predictability in their supply chain finance structures.”
More than 60% of the mid-sized multinationals surveyed by Citi identified rising cost of goods sold and raw material costs as their primary concern.
“Regionally, energy import‑dependent markets in Asia face more sustained challenges,” says Cestari. “At the same time, technology‑driven investment – particularly in AI and data infrastructure – is creating demand for much larger and more complex financing structures. That is a different dynamic, but it is equally important in shaping the supply chain finance landscape.”
So, what are corporates in India and elsewhere doing to mitigate rising supply chain finance costs? The main approaches seem to be actively preserving cash and holding higher inventory levels as a buffer – despite the impact on working capital – as well as renegotiating payment terms or adjusting commercial structures with suppliers.
“That behaviour naturally increases demand for receivables finance and inventory‑linked solutions,” says Cestari. “Supply chain finance is being used less as a tactical lever and more as a way to stabilise cash flows across longer and more uncertain operating cycles.”
