How finance leaders are countering tariff volatility

Mark Clayton, FCMA, CGMA, CPA (Aus), was traveling in India this spring when he heard news that the trade war between the United States and China had taken yet another turn.

Clayton is the CFO of C2W, China 2 West, a British-owned company that operates a factory in Zhuhai in China’s Guangdong province. He was in India, hiring employees and setting up an office, with an eye toward opening a factory there by the end of the year.

The goal was to diversify beyond China, where the small manufacturer was straining under punishing U.S. import tariffs that reached 145%. But then came the update: The tariffs were set to drop to only 30%.

It raised an obvious question: Was the India expansion still worthwhile?

“What I could really easily do is decide … I’m going to go back to China,” Clayton said in an interview during the trip. “I [could] just shut down.”

Clayton was illustrating the kind of extreme decision-making pressures facing companies across the supply chain as tariffs swing wildly through 2025. As costs rise and fall with the stroke of a pen, companies are struggling to budget and forecast and may be pressured to act hastily.

But Clayton had no intention of shutting down his new office in India.

“Regardless now of what happens, I’ve made a decision to be here, and we as a company are going to move forward with this,” he said.

The reason he felt so confident was simple: He had planned for it. Like other financial executives, he has embraced the power of scenario planning and other adaptability strategies to counter the chaos.

In interviews with FM, he and other experts shared insights that can help any organization navigate uncertainty in the budgeting, forecasting, and planning processes.

Threat to business plans

Clayton has worked in China for 20 years, helping C2W grow from a sourcing company to a manufacturer and moving from finance and sourcing manager to group CFO along the way.

The company now employs around 120 people and specializes in OEM, or original equipment manufacturer products, making everything from pizza ovens to Pilates benches, mosquito traps, Bluetooth padlocks, vending machines, and tattoo equipment.

Some 60% of the company’s exports are to the United States — making the tariffs an “existential threat” and changing the very nature of Clayton’s job. The company is responding by cutting director pay; reducing power consumption; growing its non-U.S. business; looking for tariff mitigations such as a value-adding production step in a third country, potentially avoiding U.S. tariffs on China; shaving its margins — and planning constantly.

“I should be just focusing on the numbers and the budgets and the forecasts,” he said. “But no, you have to get involved in the operational and the strategy side and the expansion … You’re on the front line of that. You’re also trying to manage the cash flow to avoid a cash crunch and manage the expansion into a completely new country.”

China-to-U.S. exporters like C2W may face the greatest volatility. But businesses across the globe are up against fluctuating profit margins, limited product availability, and changing consumer demand — all threatening to derail business plans.

“We’ve seen tariff rates change multiple times in a week. It’s created a lot of uncertainty,” said Michael Greenfield, CPA, CGMA, an accounting and advisory partner focused on consumer products at U.S. firm Anchin. “Many of my clients have taken a wait-and-see approach to things before really doing anything drastic. Some companies have put a halt on putting things into production, but that’s also going to create challenges.”

In the most extreme cases, as for C2W, this chaos is undermining the very concept of a budget.

“The simple answer is with this much volatility you cannot forecast and budget correctly. You cannot, it’s simply impossible,” Clayton said. At least for his company, “we’ve shifted to rolling forecasts instead of fixed budgets, which have temporarily stopped”.

But that doesn’t mean planning and adapting have stopped.

“It’s important to be switched on to the idea that we are in a volatile world,” said Cecilia Locati, FCMA, CGMA, the director of risk and compliance at Halma, a global group of nearly 50 technology companies.

She continued: “Build some internal process that would support the visibility and the management of the risk. That puts you in the driver’s seat as much as you can be, instead of being in a reactive mode.”

The tariff playbook, from scenario planning to messaging

Here’s how Clayton and other finance leaders are countering volatility.

Scenario planning

Companies are drafting plans for multiple scenarios — such as tariffs decreasing or increasing in various countries. For example, C2W has long used scenario planning, but it now plans for nine scenarios instead of just three, and it’s updating them more often.

When the lower tariffs were announced, scenario planning provided Clayton with a clear picture of where the company’s inventory was stockpiled and how much it might move to the United States once tariffs dropped.

Greenfield advised examining a range of scenarios, from best case to worst case. For each possible case, make predictions about company performance based on past revenue and expenses as well as assets and liabilities. For some companies, the pandemic or earlier tariffs might provide a proxy for tariff impacts.

“What’s the future going to look like for me? What’s my anticipated revenue growth? What are the tariffs going to be?” Greenfield asked.

Locati suggested that companies identify a range of scenarios that could be especially damaging to the company, such as an extreme rise in costs for the sole supplier of a component.

“Line up a set of steps that you could take,” she said.

Those steps can be divided into:

• “No regret” actions, such as identifying substitute materials or components, that will benefit the company across a range of potential scenarios.
• Higher-risk actions, such as locking into a higher-cost backup supplier, that might only be necessary if a worst-case scenario comes to pass.

Werner Mouton, ACMA, CGMA, suggested that companies develop contingency plans that can be activated as conditions change, including predetermined responses that can be initiated whenever certain triggers are hit — such as moving inventory between countries if tariffs dip below a certain level.

“Business leaders should adopt a more dynamic, scenario-based approach to forecasting rather than relying on static projections,” advised Mouton, a business consultant. Instead of treating the base-case scenario as a default plan, he added, companies should redefine it as one point within a broader distribution of outcomes.

“The traditional approach of building budgets around a single base-case scenario is increasingly problematic in today’s environment of deliberate policy uncertainty,” he said.

A range of technologies are available for scenario planning. Some companies may use advanced techniques, such as Monte Carlo simulations, to assess probabilities of outcomes. Others may use cloud software to manage and control the data at the core of scenario planning.

For his part, Clayton advised finding the tools that work best for your company — even if it’s Excel.

Frequent forecasting

Financial leaders are updating their short- and medium-term forecasts more often to keep up with changing market conditions.

C2W now updates its projections weekly. “It’s now a live process,” Clayton said.

And the company’s top executives, including its CEO, are taking a more active role in forecasting, bringing in information from teams across the business daily.

Mouton suggested that forecasts should be tuned to different timeframes, focusing on broader ranges long term and going into more detail in the short term.

“Companies need continuous re-forecasting systems for rapid updates, often monthly, alongside annual processes,” he said.

Collaborating across the business

Responding to high-volatility factors like tariffs requires working with teams across the organization.

“One person can’t do it on their own,” Greenfield said. One team might need to negotiate with retailers and producers, while others are tracking inventory on hand and auditing the company’s pipeline.

“Is the inventory on hand that we have right now sufficient to fulfil the orders that we brought in,” Greenfield said. “If not, do we need to pivot and start bringing in inventory faster than we anticipated?”

It’s critical to have a deep understanding of the company’s full finances and operations, Locati said.

“Know your business, know your financials, so that then you can adjust [operations], you can mitigate the financial impact,” she said.

Looking beyond the company

Mouton said that companies often fail to account for the “complex ripple effects” of tariffs. A tariff’s impact on the business will depend on currency adjustments, demand elasticity, and the concessions given by suppliers, as well as secondary effects on the supply chain and business environment.

That means companies need to understand their full supply chain’s exposure to tariffs and other risk factors.

“Don’t be overly reactive. Start now, not later, in mapping your supply chain exposure,” Clayton said.

Locati warned that companies shouldn’t feel “immune” just because they don’t import from China or another country involved in a tariff fight.

“You still have other suppliers that might,” she said. “Take this as an opportunity to understand more, to have more visibility over your second-tier [and] third-tier suppliers.”

Companies should also be prepared for secondary shocks — for example, Greenfield said, some manufacturers may have stopped production due to tariffs, which could result in shortages and shifted ordering windows for the holidays.

“The goods are available, it’s just more of an issue of companies delaying the process of bringing goods in,” he said, referring to his specialty in the apparel industry. “It’s a domino effect.”

Clear messaging

Plans and forecasts won’t do much good if they’re not clearly communicated within the company and beyond. And that can be a particular challenge when the environment, and the business, are changing quickly.

Locati’s message to stakeholders: “Volatility is here to stay. We need to be prepared for that, and being prepared means having a good system that puts [us] in control as much as we can be.”

Greenfield said that finance leaders should show their work, rather than presenting forecasts and plans as infallible.

“You need to be very transparent in explaining the assumptions that are going into these projections, not only to your team, but to the owners, the CFOs, and to the lenders,” he said. “They need to be part of the process, so they’re not surprised in the end.”

And even amid all the unrest and uncertainty, Clayton said, it’s important to always look for opportunity — even if, in his case, that might mean expanding into a new country.

“We try to remain agile to see what’s going to happen,” he said. “Whatever’s happening, there’s always opportunity.”

— Andrew Kenney is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.

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Articles

“7 Actions for Finance in Response to Trade Shocks” , FM magazine, 1 May 2025

“Untangling Tariffs: Consumers Expected to Bear the Brunt” , Journal of Accountancy, 11 March 2025

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“Five Actions Finance Teams Can Take on Tariffs” , AICPA & CIMA, 11 April 2025