Financial Shocks and Business Resilience: Lessons for Managers

Financial shocks almost seem like business-as-usual for any company operating internationally in 2024-25. Recent shocks like sharply rising inflation, sudden economic sanctions, and military crises each have the potential to disrupt supply chains and prevent business operations/activity.

Companies that have built up resilience are not only better equipped to overcome shocks and preserve their supply chains but can even pivot from shocks by adapting to find new opportunities. In our latest blog, we look at how managers should respond to today’s main financial shocks.

Financial shocks to watch in 2025

A financial “shock” is an external event outside of a company’s control with the potential to significantly impact its business. The most obvious shocks are unforeseeable “black swan” events like the COVID-19 pandemic, a major stock market crash, or the six-day blockage of the Panama Canal in 2021. But there are different kinds of shocks which companies must watch out for in 2025, including:

• Economic sanctions on companies and individuals. Sanctions are usually imposed without warning, and companies face legal and financial penalties for doing business with a sanctioned entity.
• Geopolitical events have inflicted financial costs on companies over the last year by causing shortages of certain goods.
• Costs of materials have sharply risen in certain industries, with dramatic effects on the balance sheets of companies in those sectors.
• Inflation has increased sharply in many countries, while certain economies are anticipating a fall over the next two years. Companies need to respond differently from jurisdiction to jurisdiction.

Supply chain chaos: the unfortunate result of financial shocks

A common impact of these financial shocks is that they can disrupt companies’ supply chains. Modern supply chains are globally interconnected, and a single product or service is often composed of parts which were supplied from multiple countries and even continents. Any disruption to one link in the chain can bring a product or service to a halt.

For example, aside from the tragic loss of so many lives, the COVID-19 pandemic had an existential impact on supply chains. National lockdowns meant many firms could no longer supply their link of a supply chain, and the economic damage from the pandemic saw numerous companies going out of business.

Just as these supply chains were starting to rebuild after the pandemic, recent geopolitical (and often military) conflicts have caused even more interruption. Such conflicts can easily devastate supply chains, given 90% of goods are shipped through maritime trade routes. For example, Israel is a leading producer of computer chips powering some of the biggest technology, retail and automotive companies in the richest countries in the world. Yet military call-ups have led to shortages of labor, and the wider conflict has limited the supply of this critical material.

While financial shocks are external and outside of a company’s control, their impact on different companies is not random. Firms who survive and thrive in the face of supply chain disruptions tend to have prepared in advance to develop supply chain resilience. But how did they do that?

MORE: How Generative AI is driving efficiency in manufacturing

5 steps to increasing your resilience to financial shocks

1. Use data to understand the impact of financial shocks

Reputable, relevant and up-to-date data can help a company prepare for financial shocks and ensure their supply chain is resilient. For example, media data can help you to understand financial shocks and economic trends as they are emerging, giving you the information you need to act quickly and confidently. Sometimes media coverage can even help to anticipate financial shocks. For example, there were media articles about COVID-19 in Asia before the pandemic reached worldwide attention.

2. Acquire relevant and authoritative data

Useful and accurate insights on financial shocks rely on gaining access to relevant and authoritative data from trusted and verifiable sources. Key sources include:

• Sanctions lists are maintained at supranational and national levels and are regularly updated without warning. Companies should periodically monitor these lists against the names of their third parties and suppliers.
• Company data can help to assess the financial health of your third parties and suppliers and predict which could be vulnerable to loss of supply or even bankruptcy in the event of a financial shock.

3. Leverage technology

There is so much data out there, and new data is being created all the time. It is therefore not possible for employees to manually read through large datasets to surface risks and insights. Instead, technology should be brought in from third-party providers to instantly screen high volumes of third parties against a broad range of data sets, and flag when new financial risks and opportunities emerge.

4. Plan ahead

You should use insights from data and technology to prepare for scenarios of different financial shocks which could emerge. What are the possible impacts of each financial risk, and how can they be mitigated? For example, knowing which suppliers would be vulnerable to going out of business allows you to identify other suppliers which could be engaged in this eventuality.

5. Take a proactive, front-foot approach

Don’t just focus on the risks and costs of financial shocks but keep a clear head in the face of a crisis and look for opportunities that may arise. For example, changes in the inflation or growth rate in an emerging market might make it a good time to launch a new product or service. Similarly, if a previously restrictive sanctions regime starts to lift sanctions, this might give you the opportunity to be the first to move in and forge new deals.

Boost your business resilience with data and technology from LexisNexis®

Managing risks and harnessing opportunities starts with having the right data on historic, current and emerging geopolitical and financial trends. LexisNexis brings together a broad range of reputable data sources to help you surface relevant and impactful geopolitical and financial insights. Our data sets include media data; company information; sanctions and watch lists; ESG risk factors; PEP data; legal records; and biographical information.

Download our ebook to learn more about the data, technology and strategy needed to develop resilience.