In today’s volatile trade environment, few issues have introduced as much unpredictability into business planning as tariffs. For CFOs, this unpredictability is more than an operational issue, it’s a material risk to margins, supply chains, and long-term growth strategies.
This article is part of a series examining the key challenges and best practices that today’s CFOs face as they navigate tariff uncertainty in 2025. Download the full guide, “The CFO’s Guide to Tariff Uncertainty in 2025”, here.
As the stewards of financial strategy, CFOs must move beyond reactive cost management and embrace scenario planning as a foundational element of tariff risk preparedness. This approach not only helps companies to quantify potential exposures. It also creates an actionable roadmap for pivoting when policy shifts occur.
Tariff uncertainty can erode profitability with little warning. In many cases, companies feel the impact only after the duties are imposed and the cost hits the bottom line. By then, the damage is done. Scenario planning enables CFOs to get ahead of damage by creating multiple “what if” paths that assess the impact of various tariff regimes. For example, what if a 25% tariff is imposed on raw materials from China? What if trade negotiations stall, extending current tariffs for another 18 months? What if tariff policy reverses course entirely? Each of these questions deserves a modeled scenario that considers revenue, cost, working capital, and supply chain outcomes. Scenario planning doesn’t mean predicting the future, it means preparing for a range of plausible outcomes, so you’re not caught off guard.
To be effective, your scenario planning process should be rooted in financial modeling, cross-functional collaboration, and real-time data inputs. Here are key components to incorporate:
- Supply Chain Mapping and Vulnerability Assessment: Identify which suppliers and components are exposed to tariff risk. Understanding the full traceability of your supply chain is essential to modeling realistic scenarios.
- Cost Impact Analysis: Determine the direct and indirect costs of various tariff levels. This includes landed cost calculations, margin pressure, and changes in product pricing strategy.
- Demand Sensitivity Modeling: Explore how price changes resulting from tariffs might affect customer behavior and volume. Will customers absorb price increases, or will demand fall off a cliff?
- Inventory and Working Capital Implications: Some companies respond to tariff threats by stockpiling inventory. Although stockpiling inventory can offer short-term protection, it also ties up capital and increases storage costs.
- Alternative Sourcing Scenarios: Evaluate the feasibility, cost, and lead times of sourcing from alternative countries. Consider the investment required to qualify new vendors or shift production.
- Tax and Compliance Considerations: Changing jurisdictions and trade routes has downstream tax and regulatory implications. Involve your tax advisors early in the planning process.
- P&L and Balance Sheet Forecasting Under Each Scenario: Quantify the full financial implications of each scenario, on gross margins, cash flow, EBITDA, and key financial ratios.
Scenario planning has little value if it remains theoretical. CFOs should make sure that each modeled scenario includes not just impact projections, but also specific triggers and execution plans. When will you pull the trigger on shifting production? At what margin pressure do you revise your pricing strategy? How quickly can you renegotiate vendor terms? Work to establish a “playbook” for each scenario.
Tariff uncertainty demands more than reactive tactics. It requires a strategic, forward-looking approach built on scenario planning, real-time intelligence, and a readiness to pivot. CFOs are uniquely positioned to lead this effort, not only by modeling financial impact but by embedding resilience and agility into the company’s operating model. Now is the time to build the scenarios, monitor the trends, and be ready to act.
How Can Schneider Downs Help?
We know firsthand that a CFO’s job is never easy. Managing a company’s financial strategy, cash flow, and risk is challenging even in stable times. If you’d like to learn how Schneider Downs’ CFO Services team can support your organization, please contact us.
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