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By: Neil Jeans, Katherine Shamai
17 Sep 2026 6 min read
Modern supply chains can be difficult to trace beyond the first few tiers. A manufacturer may know its immediate supplier, but considerably less about that supplier’s suppliers, the refinery that processed a metal, the mine it originated from, the logistics companies that moved it, or the intermediaries involved along the way.
Regulatory and geopolitical risks increasingly arise through those relationships including:
A modern supply chain is a network and can be made up of hundreds or thousands of suppliers, processors, logistics providers, financial institutions, ports, technology platforms and subcontractors. This can all sit behind a single finished product.
The UK Government’s work on global supply-chain resilience makes this point explicitly: modern supply chains are multi-tier networks, and risk can become concentrated in a relatively small number of firms, routes and chokepoints.
Australia’s response to modern slavery provides another reason businesses need to understand what practices occur beyond their immediate suppliers. Under the Modern Slavery Act 2018 (Cth), entities based or operating in Australia with annual consolidated revenue of at least $100m are required to publish annual modern slavery statements. Those statements require reporting entities to describe their operations and supply chains, identify the risks of modern slavery within them, explain the actions taken to assess and address those risks – including due diligence and remediation processes – and outline how the effectiveness of those actions is assessed.
The obligation is not confined to what happens within the company’s own offices or factories. It explicitly reaches into its supply chain. A business may never directly employ a vulnerable worker, but forced labour, debt bondage, human trafficking or other forms of modern slavery several tiers upstream can still become its regulatory, reputational and operational problem.
That makes supply-chain visibility more than good procurement practice: it is now increasingly part of demonstrating a business understands the human consequences of how its products and services are produced.
This becomes particularly important in sanctions compliance. Traditional sanctions screening tends to focus heavily on customers, counterparties, and immediate suppliers. But increasingly complicated ownership structures, intermediaries, and upstream suppliers mean sanctions exposure may exist beyond the organisations immediate line of sight.
The gold-refinery example illustrates the problem. A multinational company may purchase a component from a legitimate supplier. That supplier may source material from another manufacturer. That manufacturer may purchase processed metal through a distributor. Somewhere further upstream sits the refinery. The company at the end of the chain may never have contracted with that refinery or even known it existed. But regulators, investors, and customers may still ask an uncomfortable question: why didn’t you know?
Under US sanctions, companies can be held liable for indirect dealings with ‘blacklisted’ entities, even if they are unaware of the link. Australia’s sanctions obligations also extend beyond direct dealings: business must ensure they do not directly or indirectly make assets available to, or for the benefit of, designated person or entities, including through intermediaries, complex ownership structures or parties acting on their behalf or at their direction.
That question is likely to become increasingly important as governments rely more heavily on sanctions and trade restrictions to pursue foreign-policy objectives, and the US continues to impose secondary sanctions.
No multinational organisation can realistically map all entities involved in every product down to the smallest subcontractor with perfect accuracy. However, organisations need to understand which products, services and suppliers are critical, where significant geographic or supplier concentrations exist, which components have few substitutes, where major sanctions or geopolitical exposures sit, and where disruption would cause the greatest harm.
In other words, supply-chain due diligence should be risk-based. The company manufacturing aircraft components probably needs considerably greater visibility over the source of specialised metals than it does over the company supplying stationery to its head office.
The most useful supply-chain exercise is therefore not simply producing a map. It is asking uncomfortable questions of that map. Some examples of these questions can include:
Please reach out to one of our supply chain experts today if you’d like to discuss how this complex operating environment may impact your business or present modern slavery risks.
Article contributed to by Claudine Lamond – Risk Consulting
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