How growing tariff risks put cost transparency on the strategic agenda

On April 2, 2025 (a date his administration refers to as "Liberation Day") US President Donald Trump unveiled a set of tariffs that would impact the global economy. Since then, tariffs have been a trending topic, with new developments every week. In the financial services sector, where we deal with services, not the import and export of goods, you could argue that we might have expected to enjoy a degree of separation from these events. But the reality is that financial institutions, particularly those focusing on asset management, now face an uncertain future with clients moving to de-risk their investments and put projects on hold as everyone cautiously watches the situation develop.

One of the problems is that market uncertainty changes investor behaviours. In the global economy where everything is interconnected, financial services companies are part of every aspect of that society, that economy. So, the impact of tariffs has put the flow of trade at risk, rippling across the entire value chain.

But financial institutions are prepared. They have loans in place for companies that are directly impacted by pricing and disruption of the flow of trade, and may not be able to swiftly adjust to the new reality of higher costs or sharply decreased exports. This will lead to a greater number of loan defaults which in turn will increase the pressure to cut costs. 

Actions have consequences

The challenge for companies is how best to respond to the tariffs and, more broadly, to rapid changes in international relationships. Navigating these disruptions requires clarity and control over internal cost structures and the ability to make fact-based decisions at speed. Many organisations struggle to identify their true cost drivers or to model the impact of potential future shocks such as new trade barriers.

Achieving Cost Transparency is essential. It enables not just short-term responses, but also the design of a resilient cost strategy. Through structured approaches such as investment portfolio risk scenario analysis and cost structure assessments, organisations can gain the insight they need. With a clear understanding of where value is created or lost, it becomes possible to turn those insights into action, shaping cost control strategies that are proactive rather than reactive.

Bringing cost transparency into business-as-usual operations empowers companies to stay ahead of change, rather than be disrupted by it.

Rethinking dependencies

With an ever-growing number of challenger banks competing with traditional institutions for market share, profit margins in the financial sector have come under pressure. As a result, cost transparency and cost control have become essential strategic priorities. The industry has matured and efficiency, not just growth, is now at the forefront of boardroom discussions.

In Europe, there’s a noticeable shift as companies seek to reduce their reliance on US-based products, driven by uncertainty around future market conditions and regulatory developments. The pace of global change is such that cost control can no longer be reactive, it must be embedded in strategic planning.

It is no longer safe to assume that global powers like the United States will remain stable and predictable. For example, how would Europe respond if e.g. President Trump imposed tariffs on software or digital services? Globalisation is being tested, and prudent organisations are preparing for the unexpected.

To do so, clients need clarity, what they are spending, where they are spending it, and how their supply chains are structured. European banks are already assessing their dependence on US-originated technologies, such as tooling and cloud services, anticipating that these may become targets for tariffs, if not today, then in the near future.

• Read article: How a financial institution achieved cost transparency through a complex EMEA technology integration

Start here

Data is crucial to this process. Yet, many companies simply do not have access to the quality data needed to quickly and effectively assess the potential impacts of these tariffs. 

Unfortunately, the larger and more established the financial institution, the greater the struggle to gather the data required to achieve cost transparency.  A bank that is perhaps two-hundred years old will find it much harder than a new bank born of the digital age, though even the latter will have big data challenges.   

This data is needed to identify and catalogue where the money is being spent and quantify risk exposure by identifying how much co-dependency a company currently has on US products and services. Once you have achieved this, you can explore possible alternatives and solutions that would avoid businesses being held to ransom by US suppliers like, for example, Amazon Web Services. Some European banks are already working collaboratively to explore their cloud-storage options. 

Many organisations are starting by identifying their co-dependencies on US products and services, driven by a need to manage exposure and uncertainty. Gaining cost transparency provides the insights needed to optimise costs and strengthen risk management strategies.

‘Never let a good crisis go to waste’ - Winston Churchill

This fundamental shift in the marketplace is already happening.  Europe is looking at how it can become strategically less dependent upon other major players and that is changing how trade flows across the world. 

It is a long-term shift that will affect where products and services are sourced, which in turn will increase prices because companies will no longer be able to choose the cheapest source for their products or services because of the risk of tariffs.

It also means that truly global players will in future see fewer benefits from their worldwide presence. 

Anything can, and possibly will, happen over the next four years. Is there an expectation that this will be reversed and is in fact just a short-term blip? No, there is not. This is an evolving conversation that will continue.

Have we been here before? Yes, we have and examining global trade patterns reveals how fragile supply chains can be. Consider the recent Suez Canal blockage that triggered widespread disruption. Serious concerns emerged about China's ability to maintain deliveries to the United States, threatening numerous supply chains with collapse as their economic viability came into question.

 We have got to prepare for potentially radical change. Organisations in the financial services sector need to identify where their services, products and income are sourced and then consider diversifying their portfolio to build resilience for the future.

Navigating this new tariff landscape demands not only that you complete an incisive market analysis but also that you are ready and able to take decisive, strategic action.

Conclusion

With greater cost transparency, you can improve cost control, streamline your operations, and make informed decisions about strategic investments. Projective Group works with clients to build end-to-end cost transparency, from analysing cost drivers and mapping supply chain dependencies, to optimising business processes and designing cost control frameworks. This enables organisations to engage in fact-based decision-making around strategic investments and long-term planning.

Want to find out more about how you can leverage cost transparency in your organisation? Connect with us to explore your tailored journey.