As Canadian businesses adjust their supply chains in response to the recent implementation of 25% across-the-board tariffs on Canadian goods, experts from KPMG in Canada are urging businesses to be vigilant against rising fraud and cybersecurity risks.
A recent KPMG survey revealed that nearly half (44%) of Canadian businesses are already reconfiguring their supply chains to divert U.S.-bound exports through third-party countries, while another 44% are exploring this option. However, these changes could expose businesses to numerous risks, particularly when engaging new suppliers.
According to Myriam Duguay, Partner and National Forensic Leader at KPMG in Canada, “With U.S. tariffs now in place for Canadian exporters, many businesses might rush to switch suppliers, and in doing so, they might not do the rigorous due diligence that’s needed to reduce third party risks.” She adds, “Businesses must be vigilant about engaging new suppliers that make illegitimate or overstated claims about their capabilities.”
Additionally, new suppliers could introduce significant cybersecurity concerns. As businesses shift their supply chain models, they may inadvertently increase their vulnerability to security breaches. Hartaj Nijjar, KPMG in Canada’s National Cybersecurity Leader, explains, “If the new suppliers do not have robust cybersecurity measures in place, they could become a weak link in an organization’s supply chain, potentially leading to data breaches.” Nijjar further warns, “Businesses should also be aware of fake suppliers that appear legitimate but are actually threat actors in disguise. This is becoming more prevalent now with the rise of AI-powered deepfakes.”
To mitigate these risks, KPMG’s forensic and cybersecurity specialists recommend Canadian businesses consider the following strategies when changing suppliers:
- Supplier Due Diligence: Conducting integrity due diligence is essential. This includes verifying the legitimacy, financial stability, and reputation of new suppliers to avoid fraudulent partnerships.
- Contractual Risks: New supplier contracts should be thoroughly reviewed for hidden clauses or misrepresentations to avoid fraud and ensure fairness in business agreements.
- Payment Fraud: Changes in suppliers may introduce new payment processes, increasing the risk of invoice fraud. Implementing strict invoice verification processes can help reduce these risks.
- Supply Chain Visibility: A reconfigured supply chain may reduce visibility, making it harder to track goods and payments. Using technologies such as AI-powered digital twins or blockchain can improve transparency and traceability.
- Internal Controls: Updating and reinforcing internal controls after changes in suppliers and supply chain configurations is crucial to preventing fraud.
- Cybersecurity Risks: Organizations should conduct risk assessments on new suppliers to ensure they have robust cybersecurity measures in place before onboarding them.
- Deepfake Risks: As deepfakes become more common, businesses must invest in verification technologies and train employees to identify potential risks from fake suppliers.
- Employee Training: Training employees, particularly in supply chain and accounting departments, to recognize fraud and cybersecurity risks is essential for early detection.
- Regulatory Compliance: Businesses must ensure that new suppliers comply with necessary regulations to avoid legal issues and potential fraud.
Duguay emphasizes, “While changing suppliers and reconfiguring supply chains can help businesses mitigate the added cost of tariffs, they need to be aware of the associated fraud and cybersecurity risks. Implementing robust due diligence, maintaining strong internal controls, and ensuring compliance with regulations can help mitigate these risks.”
For more information on fraud prevention and resources, businesses can visit KPMG Canada’s Fraud Prevention Page.
Tune in to KPMG in Canada’s upcoming DX Coffee Chat, Outsmarting Fraud in a Digital World: Outsmarting fraud in a digital world Registration
For more resources on U.S. tariffs, visit: Navigating tariffs – KPMG Canada
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