• Aligning international tax strategy with global supply chain planning helps reduce tax exposure, capture incentives, and increase operational agility.

• Ignoring exit taxes, transfer pricing, or cross-border compliance risks can create multi-year tax liabilities, penalties, and restructuring costs.

• Involving tax leaders early in global supply chain restructuring leads to smarter decisions, improved timelines, and long-term business scalability.

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In today’s dynamic global business environment, aligning your organization’s international tax planning with supply chain planning strategy isn’t just a best practice — it’s essential. From shifting trade relationships and tariffs to increased scrutiny from global tax authorities, your company’s ability to make tax-informed supply chain decisions can directly impact cash flow, risk profile, and competitive positioning.

Here’s how your tax and operations leaders can collaborate to build a globally agile structure, and why international tax strategy must be at the core.

Why International Tax Strategy Must Drive Global Supply Chain Decisions

Mid-market organizations are rethinking their operational footprint — reshoring, nearshoring, or diversifying supplier bases. But without a clear international tax lens, these shifts can trigger unintended consequences: exit taxes, loss of treaty benefits, or transfer pricing risks.

A tax-aligned supply chain strategy allows you to:

• Forecast and manage global tax liabilities

• Capture incentives and avoid inefficiencies

• Make faster, more informed decisions across jurisdictions

Integrate International Tax Early in the Planning Process

Waiting until after operations moves are underway can leave your business with a fragmented tax structure that requires costly remediation. This is especially critical for mid-market companies operating across the U.S., EMEA (Europe, the Middle East, and Africa), or APAC (Asia-Pacific) regions, where cross-border structuring can create unexpected tax burdens. Tax should be involved from the outset — modeling scenarios across jurisdictions, projecting costs, and identifying risk exposure.

For example:

• Moving production from China to Mexico might avoid certain tariffs — but could expose your business to exit taxes in China or permanent establishment risk in Mexico.

• Relocating intellectual property (IP) from Ireland to the U.S. might trigger a deemed disposal event under local exit tax regimes.

Technology platforms and predictive models can help tax teams simulate these impacts before major decisions are finalized.

Strengthening Transfer Pricing and Global Compliance

Global tax authorities are tightening enforcement — especially around transfer pricing and cross-border restructurings. If your tax structure no longer reflects your actual operations, you may face:

• Double taxation

• Disallowed deductions

• Penalties and disputes

Update your transfer pricing documentation to reflect the new supply chain model. Intercompany agreements, economic analyses (including IP valuation), and jurisdictional reporting must all align with your post-transition structure.

Unlock Incentives Through Coordinated Strategy

Supply chain shifts aren’t just about avoiding risk — they’re also an opportunity to capture new value. Jurisdictions including the U.S., Canada, Mexico, and certain European Union countries offer targeted tax incentives for reshoring, green investment, R&D, or job creation.

If these incentives aren’t launched early in planning, your business could miss out. Tax should coordinate with operations and finance teams to explore:

• U.S. federal and state credits for manufacturing investment

• R&D credits tied to newly localized functions

• Foreign tax credits or deferrals available in new jurisdictions

Create a Globally Scalable Tax Playbook

Reactive tax planning doesn’t scale. As your organization enters new markets, integrates M&A targets, or adds new suppliers, your international tax model must be flexible and supported by a clear global tax governance framework.

A forward-looking playbook helps you:

• Align tax structure with business decisions

• Build global tax governance into location changes, IP moves, and new legal entities

• Reduce friction during rapid growth or operational transformation

The Path Forward: Strategy, Agility, and Risk Reduction

International supply chain restructuring can unlock efficiency, improve margins, and reduce geopolitical exposure — but only if tax is at the table from the start.

Organizations that treat tax as a strategic partner rather than a compliance function are better positioned to navigate volatility and create long-term value.

How MGO Can Help

At MGO, we help companies navigate the complexities of global tax strategies and cross-border operations. From international structuring and transfer pricing to tax technology and incentive optimization, we serve clients across manufacturing, life sciences, technology, and more.

We work closely with CFOs and tax executives to align tax planning with business transformation — supporting global agility, regulatory compliance, and strategic growth. Let’s talk about how your international tax strategy can support your global operations.

The post How to Align Your Global Supply Chain and International Tax Strategy appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Cross-border supply chain changes can trigger exit taxes, compliance penalties, and tax inefficiencies if not planned with international tax in mind.

• Proactive coordination between tax and operations helps reduce global tax exposure, unlock incentives, and speed of execution across jurisdictions.

• Country-by-country reporting (CbCR), transfer pricing alignment, and entity structuring are critical to avoiding double taxation and audit risk.

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Global supply chain changes are rarely just operational — they’re deeply connected to international tax exposure. From exit taxes and transfer pricing risks to missed incentives and compliance hurdles, tax leaders must be part of the decision-making process from day one.

6 Supply Chain and International Tax FAQs

In this FAQ, we answer the most frequent questions our clients ask when planning cross-border restructurings, relocations, or supplier changes — so your business can move faster, smarter, and with fewer tax surprises.

1. What are the international tax risks when shifting supply chain operations?

Relocating manufacturing, coordination, or key functions across borders creates exposure to multiple tax regimes. Common risks areas include exit taxes, transfer pricing, permanent establishment issues, and customs duties. Without early tax planning, these costs can result in long-term liabilities or missed opportunities.

2. How do exit taxes work, and when do they apply?

Exit taxes are levied when valuable functions, assets, or risks — such as intellectual property (IP), staff, or customer relationships — are moved between countries. For example, transferring IP from Ireland to the U.S. may trigger a deemed disposal under Irish tax law. These taxes can be significant and must be modeled early in any restructuring.

3. What should I know about transfer pricing when moving suppliers or functions?

Transfer pricing must reflect your current business operations. If you shift suppliers, relocate production, or move functions without updating your intercompany pricing, tax authorities may challenge the arrangement — leading to adjustments, penalties, and double taxation. All intercompany agreements and transfer pricing documentation must align with your post-change structure.

4. Are there tax incentives available when reshoring or nearshoring operations?

Yes. Countries such as the U.S., Canada, Mexico, Ireland, and Singapore offer targeted tax credits and incentives for domestic investment, clean energy transitions, and R&D localization. Examples include:

• U.S. federal/state manufacturing credits

• Job creation and infrastructure grants

• R&D and capital investment incentives

However, these must be planned early to capture their full value.

5. How can technology help manage international tax complexity?

Tax technology platforms help model jurisdictional impact, manage data for compliance reporting (like CbCR), and simulate the tax effects of operational changes. Integrated enterprise resource planning (ERP) and tax systems also improve visibility and reduce risk in real-time decision-making.

6. What role should international tax play in supply chain strategy?

International tax teams should be involved from the start of any supply chain realignment. Embedding tax early helps you find risks, unlock incentives, and structure deals for long-term compliance and flexibility. A reactive approach often results in avoidable costs, delays, and exposure.

Next Steps for Smarter Global Planning

Successfully navigating international tax risks requires more than compliance — it takes a forward-thinking approach aligned with your global operations. At MGO, we support CFOs and tax leaders with international tax planning, transfer pricing analysis, and incentive identification to help reduce exposure and drive business agility.

Learn more about our International Tax and Transfer Pricing services or contact us to discuss how we can support your global growth strategy.

The post Frequently Asked Questions About International Tax and Supply Chain Realignment appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Manufacturers are reassessing supply chains and tax strategies to adapt to shifting tariffs and tighter margins.

• Retailers and overseas suppliers are pushing back on price increases, placing more pressure on distributors.

• Rapid scenario planning and operational agility are essential as companies navigate a fast-changing trade and demand environment.

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After a brief period of optimism, the U.S. manufacturing sector has slipped back into contraction. The Institute for Supply Management (ISM) reported a decline in activity for July 2025, raising fresh concerns about the resilience of an industry already strained by global instability, cost volatility, and labor shortages.

According to ISM reporting, July continues a multi-month downturn in U.S. manufacturing. Rising tariffs on semiconductors, clean tech components, and electronics are contributing to declining optimism and margin pressure.

In response, manufacturers are accelerating reshoring strategies, rethinking sourcing models, and reallocating capital toward U.S.-based production. But these operational shifts carry downstream effects — including supply chain disruption, pricing tensions with retailers, and growing tax complexity.

Tariff Impacts Driving Operational and Financial Restructuring

The latest round of tariff policy changes — particularly those targeting semiconductors, clean tech components, and consumer electronics — has added urgency to supply chain reassessment across the manufacturing and distribution sector. For many mid-sized companies, this is no longer a matter of long-term planning, but of near-term survival.

In addition to long-term shifts, companies are contending with immediate pressures that demand more agile, real-time responses. With the policy environment shifting rapidly, firms need to be able to redirect sourcing, adjust pricing, and adapt operations quickly in response to new trade terms or economic signals. Retailers are resisting price increases amid soft consumer demand, while overseas suppliers show little willingness to absorb added tariff costs. This dual resistance leaves U.S. manufacturers and distributors caught in the middle — facing rising input costs and shrinking pricing power.

This pricing stalemate has forced many companies to absorb margin pressure themselves, accelerating the need for real-time scenario planning and rapid cost modeling. Facing inflexible suppliers and impatient buyers, some firms are exploring new supplier relationships altogether — often under compressed timelines and uncertain economic conditions.

These dual pressures are driving a shift toward faster, more flexible operational planning. Traditional multi-quarter strategy cycles have given way to real-time adjustments, where pricing models, sourcing plans, and capital deployment decisions are made in weeks rather than quarters. Today, manufacturers are engaging in rapid scenario modeling, adjusting pricing structures on the fly, and mapping out contingency plans for everything from inventory shifts to capital deployment.

These changes are not occurring in silos. Every sourcing decision affects tax exposure, every pricing adjustment impacts working capital, and every supplier switch creates new compliance considerations. That’s why companies are increasingly approaching supply chain restructuring as a cross-functional exercise — integrating finance, tax, and operations into a single planning framework built for speed, resilience, and data-informed execution.

Technology Investment Moves to the Forefront

Despite economic headwinds, many manufacturers are prioritizing tech adoption. Automation, AI, and advanced data tools are being used to improve throughput, reduce waste, and alleviate workforce gaps.

However, technology investments only deliver value when aligned with operational and financial systems. That’s why firms are increasingly focused on integrating data across functions, streamlining reporting, and tracking ROI in real-time. The shift isn’t just about adopting new tools — it’s about embedding them into core workflows and decision-making processes.

Advisory support in this space is helping companies make smarter, phased tech decisions — prioritizing high-impact areas first, then expanding as capacity grows. By focusing on tangible results and incremental wins, companies can build momentum while managing risk and preserving capital.

Operational Risk and Controls Under Strain

As manufacturers digitize operations and integrate more advanced technologies, traditional internal controls are being tested in new ways. Increased reliance on connected systems and data flows elevates operational risk — not just in terms of security, but also in accuracy, oversight, and regulatory compliance.

Legacy systems often require updated controls to support modern processes and maintain reporting integrity and process reliability, particularly as companies scale or reconfigure supply chains. In some cases, control gaps can expose the business to financial reporting risks as well as operational disruptions that affect fulfillment, cash flow, or customer trust.

Many organizations are reevaluating risk frameworks, updating governance structures, and taking a more proactive approach to finding and addressing control deficiencies that legacy operating models may have masked. This includes reassessing control ownership across departments and embedding real-time monitoring into critical workflows.

A Time for Reinvention

Strategic roadmaps are being replaced by agile frameworks that enable cross-functional teams to pivot quickly. Multi-year plans have given way to agile playbooks that allow operations and finance teams to redirect quickly. Tariff pressures, labor challenges, and rising technology demands are converging in an environment that is increasingly unpredictable and fast-moving.

The ability to scenario-plan and reallocate resources in near-real time is becoming a competitive advantage — particularly as pricing power erodes and supplier relationships grow more complex. The ability to act quickly — operationally and financially — is becoming a key differentiator, particularly as pricing power weakens and supplier negotiations become more complex.

For mid-sized firms, this creates both pressure and opportunity. Those that realign operations, improve visibility, and strengthen internal decision-making processes will be better equipped to lead through change. Outside advisors are playing a critical role — supporting companies with financial modeling, tax strategy, and operational planning that’s built for speed and uncertainty.

In this climate, long-term success will favor firms that can move with both speed and precision.

Supporting the Industry Through Change

MGO works with manufacturing and distribution companies navigating disruption and building for what’s next. Our team delivers practical, industry-informed guidance to help middle-market companies make confident, forward-looking decisions in times of change.

As pricing pressures and policy shifts reshape the landscape, we can help your organization respond quickly and strategically — adapting financial strategies, modeling supply chain scenarios, and reinforcing risk and control frameworks. Reach out to our team today to learn how MGO can help you move forward with clarity, confidence, and resilience.

The post Your Manufacturing Strategy in a Tariff-Driven Market appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Resilient growth demands a dual-lens strategy, integrating internal capabilities with external market intelligence.  

• Manufacturers face unprecedented disruptions — from workforce shortages to rapid digital transformation—that require bold strategic responses.  

• Long-term success is built on proactive planning, data-driven insights, and cross-functional alignment, not reactive, short-term fixes.  

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Integrating Inside-Out and Outside-In Analysis to Future-Proof Decisions 

Manufacturers are navigating an environment of constant disruption, from tariff uncertainty and supply chain issues to geopolitical instability and labor shortages to technological leaps and evolving customer demands. 

Reactive strategies based on temporary conditions run the risk of losing market share and failing to meet customer expectations. Sustainable success requires proactive, long-term strategic planning focused on attractive markets. 

Today, finding new sources of growth is no longer about simply scaling operations. 

It’s about integrating internal analyses while monitoring and understanding external market dynamics. This balanced perspective empowers leaders to make decisions with confidence – even as uncertainties continue to challenge the industry. 

The Manufacturing Growth Imperative 

The Time to Act is Now 

It’s not hyperbole to say that the manufacturing industry is transforming at unprecedented speed. 

The sector faces significant challenges that demand bold strategic responses rather than safe tactical adjustments. 

This transformation is taking place during a time of massive disruption: 

• Supply chain vulnerabilities exposed by global disruptions 

• Workforce shortages amid shifting skill requirements 

• Digital transformation pressures and Industry 4.0 adoption 

• Rising customer expectations for customization and service 

• Increasing global competition and market volatility 

• Environmental sustainability demands and regulatory changes 

In such a turbulent environment, manufacturers can no longer rely on incremental improvements to drive growth. Instead, they need a strategic framework that allows them to systematically, properly evaluate opportunities and make informed decisions about where and how to grow. 

Manufacturing companies have access to a wealth of internal data – from customer reports to margin analyses, to R&D performance to production and supply chain metrics. At the same time, external data such as consumer trends, competitive moves, geopolitical shifts, and emerging technologies provide invaluable context. 

Executives who can blend these two dimensions are uniquely positioned to craft strategies that are both resilient and adaptive. 

The Dual-Lens Growth Framework 

Inside-Out and Outside-In Analysis  

Achieving sustainable growth requires evaluating opportunities through two complementary perspectives that work together to identify the most promising routes for expansion where companies have a “right to win”. 

Strategic Evaluation 

The Ansoff Strategic Growth Matrix  

After conducting outside-in and inside-out analyses, we can apply a framework to simplify complex decisions and provide a structured method to evaluate risks and rewards. 

A modified Ansoff Matrix is a powerful tool to visualize the most promising growth opportunities. This framework divides growth strategies into four quadrants, each addressing different combinations of internal capabilities and external market opportunities. 

From Analysis to Action 

Four Growth Acceleration Levers  

Irrespective of what quadrant in the Ansoff matrix a manufacturing company may decide it wants to play, it has four levers at its disposal to accelerate their growth strategy: 

The Path Forward 

Executing a Growth Strategy  

The integration of internal analyses with external insights—and the application of frameworks like the Ansoff Matrix—provide manufacturing leaders with the roadmap to sustainable growth. By continuously challenging the status quo, engaging with emerging market signals, and investing in transformational technologies, manufacturers can drive innovation, secure market share, and mitigate future risks. 

Forward-looking executives should focus on: 

• Data Integration – Invest in robust data analytics platforms that merge internal performance metrics with external market intelligence. 

• Strategic Flexibility – Use frameworks to stress test strategic choices and adjust priorities as market conditions evolve. 

• Collaboration & Alliances – Establish strategic partnerships that provide access to technological innovations and new consumer segments. 

• Cultural Shift – Promote an internal culture of continuous improvement and experimentation to stay ahead in a competitive marketplace. 

Structured Approach & Roadmap 

Successful implementation of manufacturing growth strategies requires a structured approach that balances immediate action with long-term transformation. 

Phase 1 

Assess and Strategize / 0-6 months 

• Conduct comprehensive inside-out and outside-in analysis 

Systematically evaluate market opportunities and organizational capabilities using the frameworks outlined earlier. Include revenue/margin analyses, customer research, competitive intelligence, technology assessment, and internal capability audits. 

• Segment and pressure test end market capacity 

Conduct internal analysis to assess segmenting business units aligned to end users and markets, root out complexity, and pressure test hypothesis. Ensure adequate end market demand and identify new market opportunities. 

• Identify strategic growth opportunities 

Apply the Growth Matrix to prioritize opportunities based on market attractiveness and organizational fit. Develop specific business cases for the most promising opportunities, including resource requirements, timeline, and expected returns. 

• Align leadership and stakeholders 

Build consensus around the strategic direction through structured engagement of executive leadership, board members, and key stakeholders. Establish clear governance and KPI monitoring. 

• Define your “North Star” 

Develop a compelling vision for the organization that inspires and aligns. Articulate how the growth strategy will create value for customers, employees, and shareholders. 

Phase 2 

Pilot and Scale / 6-18 months 

• Test strategic initiatives 

Implement limited-scope pilots for key growth initiatives to validate assumptions, refine approaches, and demonstrate value. Pilots should be structured as learning experiments with clear success criteria. 

• Validate technology investments 

Evaluate technology solutions through proof-of-concept projects that demonstrate functionality and value without requiring enterprise-wide deployment. Use these projects to build internal capabilities. 

• Refine based on market feedback 

Actively solicit customer and market feedback on pilot initiatives, using this input to refine value propositions, offering design, and go-to-market approaches before scaling. 

• Scale successful initiatives 

Once pilots demonstrate success, develop detailed scaling plans that address organizational requirements, process changes, technology infrastructure, and change management needs. 

Phase 3 

Optimize and Innovate / 18-36 months 

• Enhance operational efficiency 

Apply continuous improvement methodologies to optimize the performance of new growth initiatives. Use data analytics to identify bottlenecks, inefficiencies, and improvement opportunities. 

• Leverage data and analytics 

Develop more sophisticated data capabilities to refine market targeting, customer segmentation, and offering optimization. Implement closed-loop feedback systems that enable continuous learning and adaptation. 

• Explore emerging technologies 

Monitor technological developments and conduct targeted experiments with promising technologies that could enable new growth opportunities or enhance existing initiatives. 

• Build ecosystem partnerships 

Develop strategic relationships with technology providers, channel partners, and complementary solution providers to accelerate innovation and market access. 

Phase 4 

Sustain and Lead / 36+ months 

• Embed growth mindset 

Develop organizational systems and processes that continuously identify and pursue growth opportunities. Include incentive structures, performance management systems, and resource allocation. 

• Maintain competitive advantage 

Invest in capabilities that preserve differentiation as markets evolve and competitors respond. This might include continued R&D investment, talent development, or strategic acquisitions. 

• Adapt with agility 

Establish mechanisms for sensing market changes and rapidly adjusting strategies in response. This requires both market intelligence systems and organizational flexibility. 

• Shape industry standards 

Take a leadership role in influencing industry standards, regulations, and ecosystem development to create favorable conditions for continued growth. 

Turn Disruption into Opportunity 

The most successful manufacturers will be those that maintain a long-term strategic perspective while building the agility to respond to short-term market shifts. Success hinges on continuously assessing the interplay between internal capabilities and the dynamic external landscape. Manufacturers can not only weather disruption but also capitalize on the opportunities it presents, building a robust engine for sustainable growth and competitive advantage. 

Written by Val Laufenberg, Iliya Rybchin and Kevin Medved. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Can Help 

At MGO, we understand the unique pressures manufacturers face in today’s disruptive landscape. Our advisors help you blend inside-out and outside-in analysis to build a growth framework that’s both resilient and adaptive. Whether you’re evaluating expansion strategies, navigating regulatory changes, or aligning organizational resources, we’ll help you uncover opportunities and make decisions with confidence. Let’s work together to future-proof your growth strategy. Contact us to learn more.  

The post Manufacturing Growth in the Age of Disruption  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Tariffs are driving up costs and forcing companies to rethink supply chains, supplier relationships, and sourcing strategies for resilience. 

• Boards must evaluate pricing models, competitive positioning, and financial strategies to stay agile amid shifting global trade dynamics. 

• Global operations require ongoing compliance reviews and risk assessments as countries respond with retaliatory trade measures. 

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Tariffs are back — front and center — and disrupting global markets and supply chains. In February and March, the Trump Administration triggered the latest trade war by imposing tariffs on various imports under a 1977 law — the International Emergency Economic Powers Act (IEEPA) — that had never been used to impose tariffs. These tariffs do not discriminate and now impact every trading partner of the U.S. without exception.  

Rising costs are causing organizations to scramble and question their business strategies to manage the significant and immediate cash costs involved with these new tariffs, which are all “above the line” and have to be paid by the U.S. importer of record to U.S. Customs and Border Protection at the time goods are imported. Because other countries have already announced retaliatory tariffs, similar cash costs are facing importers in foreign jurisdictions when they purchase merchandise of U.S. origin. 

Board Navigation Considerations 

Navigating this tumultuous geopolitical environment is a challenge that many boards of directors have not had to face in recent years. As directors begin to adapt to this new normal and rethink their approach to mitigate impact to their organizations, here are some issues they should consider: 

Supply Chain and Operational Resilience 

How will tariffs impact our supply chain and how can we mitigate disruption? Can we identify and prioritize where increased costs from materials and/or finished goods may arise?  

• Do we have strong relationships with our suppliers?  

• Can we partner with our suppliers to jointly offset the tariff impacts and/or improve resilience? 

• Can we renegotiate any existing supplier contracts?  

• Can we diversify our supply chain by introducing other suppliers and exploring alternative sourcing options? 

• If we diversify, how might this impact any sustainability practices in place? 

• How can we adapt and/or evolve so that this doesn’t negatively affect our bottom line? 

Pricing Strategies and Competitive Positioning 

How will tariffs impact our pricing strategy and market competitiveness? 

• Are there opportunities to capitalize on changing trade policies? 

• Are our competitors adjusting their pricing?  

• Do we need to adjust our pricing to account for increased costs?  

• If we increase our prices, will this significantly affect our competitiveness in the marketplace?  

• Are we continually seeking to expand and solidify our relationships with our customer base?  

• Do we understand and agree with assumptions by management to model the financial and operational impacts? 

• Are we investing in R&D initiatives to absorb additional costs incurred or leverage potential cost savings? 

• Have we considered financial hedging strategies to manage currency fluctuations and risk? 

Global Operations and Compliance Assessment 

Have we carried out an assessment of all countries in which we operate? 

• Have these countries introduced retaliatory tariffs or do they plan to do so? 

• Are we too reliant on one country for sourcing and could we shift and/or rely on other countries? 

• How will our customer base react if we shift operations to another country? 

• How stable is the political environment in the countries in which we operate? 

• Are we monitoring changes in trade policies and monitoring our processes to remain compliant? 

Board Composition and Expertise 

Does our board have the knowledge and skills required to oversee global trade and economic policy impacts? 

• Do we need to bring in external subject matter expertise to educate and advise the board? 

• Is the full board or a committee/subcommittee responsible for overseeing and advising on tariff strategy? 

• How can we upskill our directors in global trade and economic policy? 

Other Considerations 

Additional considerations for the board:  

• Are we anticipating trade impacts on strategy in both the near and longer term? 

• How is management prioritizing investments to adapt to tariffs and trade policy shifts? How are they defining ROI? 

• Is management considering efficiencies to be gained in automating processes related to trade and tariff considerations? 

• Do we have an intentional stakeholder communication strategy regarding the impact of tariffs on our business? 

• Is management proactive in gathering and considering feedback from suppliers and customers on pricing changes and/or supply decisions? 

Written by Rachel Moran, Damon V. Pike and Amy Rojik. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com  

How MGO Can Help 

At MGO, we understand that the return of sweeping tariffs — and the complexity they bring — can threaten every aspect of your organization’s operations, from pricing and supply chains to global compliance and board governance. Our team brings deep experience across international trade, tax strategy, and operational resilience to help you not only manage your near-term cash impacts of tariffs but also reimagine your strategies for long-term stability and growth. 

Whether you’re navigating retaliatory tariffs, reassessing competitive positioning, or future-proofing your supply chain, we can provide the insight and support you need to move forward confidently. Contact us today to learn more.

The post Global Trade Tensions: What Should the Board Know as Tariffs Evolve and Expand?  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Tariffs increase material costs and uncertainty, challenging how your U.S. apparel brand manages production and pricing strategies.

• Supply chain volatility from shifting trade policy forces your business to rethink sourcing, inventory, and cash flow management.

• Without clear, consistent tariff rules, it’s harder for apparel companies to invest in long-term domestic manufacturing solutions.

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If you run a U.S.-based apparel company, you’ve likely heard that tariffs were meant to level the playing field. But for many in the industry, they’ve done the opposite — raising costs, sowing uncertainty, and complicating domestic production. With fabric and components sourced globally and labor-intensive processes still rooted overseas, your business is caught in policy limbo.

Background: The Tariff Trap

Recent rounds of tariffs — particularly under the International Emergency Economic Powers Act (IEEPA) — were intended to push manufacturing back to U.S. soil. But apparel isn’t like steel or semiconductors. Most American-made garments rely on imported fabrics and specialized inputs from Europe and Asia. Now, U.S. companies that cut and sew domestically are hit with fees not only on finished goods but also on raw materials — from Italian linen to recycled goose down from Switzerland.

Your business doesn’t benefit when both your competitors and your suppliers are penalized.

Rising Costs, Limited Gains

Tariffs might raise the price of foreign goods, but for domestic producers that increase rarely offsets the broader challenges:

• The average U.S. clothing item already costs significantly more due to fair labor wages, healthcare, and compliance standards.

• Most local manufacturers serve niche, high-end markets where even slight price hikes reduce demand.

• Investment in automation or workforce expansion becomes risky amid tariff instability.

As one industry leader told The New York Times, “If we know these tariffs are locked in … we can deal with it. But right now, it might change tomorrow.”

Uncertainty Freezes Innovation

Your apparel company needs clarity to make long-term decisions — on hiring, machinery, and sourcing. Yet, recent reversals and pauses in policy have undermined confidence. Business leaders across the sector are holding back on growth initiatives, delaying plans to move production domestically, and watching consumer demand fall as inflation creeps into discretionary spending categories.

Alternative Solutions: Beyond Tariffs

There are more effective strategies to support U.S. apparel than blunt-force tariffs:

• Federal procurement mandates: Extending Buy American rules beyond military contracts could offer your company stable demand.

• Wage subsidies: Redirecting tariff revenue to offset domestic labor costs, as some entrepreneurs suggest, would truly support reshoring efforts.

• Transparent trade policy: Your supply chain planning hinges on consistent, long-term policy, not reactive measures driven by political cycles.

Regulatory Pressure Meets Strategic Insight

With trade policy increasingly shaped by executive authority — like the IEEPA — your business must assess both direct financial impact and indirect regulatory exposure. For apparel manufacturers subject to audit requirements or preparing for financing, aligning your operations with Public Company Accounting Oversight Board (PCAOB) and Financial Accounting Standards Board (FASB) standards is non-negotiable.

MGO works with brands like yours to incorporate shifting cost structures from tariffs in financial statements, inventory valuation, and pricing models — helping you keep your firm aligned with generally accepted accounting principles (GAAP) and investor-ready.

Preparing for What’s Next

Whether you’re producing premium fashion in Houston or high-volume basics in Los Angeles, your apparel business faces complex financial and regulatory pressures. MGO offers audit clarity, tax efficiency, and consulting support tailored to today’s global apparel supply chain.

From understanding tariff impacts on GAAP reporting to improving sourcing strategies amid global disruption, we help apparel brands move forward with confidence.

Learn more at mgocpa.com/apparel

The post How Tariffs Disrupt Your Apparel Brand’s Supply Chain appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Audit committees (ACs) are prioritizing enterprise risk management (ERM) due to a dynamic risk environment influenced by geopolitical factors, supply chain disruptions, and technological advancements.

• The composition and structure of the board are critical for effective risk governance, and AC members need industry knowledge and relevant experience to oversee the ERM process effectively.

• Boards should clearly articulate risk appetites, engage in ongoing education, and stress-test ERM processes, with holistic risk conversations.

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1. Enhanced Risk Governance: Audit committees (ACs) are prioritizing enterprise risk management (ERM) due to a dynamic risk environment influenced by geopolitical factors, supply chain disruptions, and technological advancements.

2. Board and Committee Composition: The composition and structure of the board are critical for effective risk governance. AC members need relevant experience and deep industry knowledge to oversee financial reporting and ERM processes effectively.

3. Leading Practices for Oversight: Boards should clearly articulate risk appetites, engage in ongoing education, and stress-test ERM processes. Effective risk conversations should be holistic, incorporating strategy and planning, and involving collaboration across the organization.

In an era when the business landscape is characterized by rapid changes and rising uncertainties, the need for robust governance oversight has never been more critical. As organizations strive to navigate an increasingly complex business environment, the role of the board in overseeing enterprise risk management, financial reporting, and compliance becomes paramount. This publication discusses the evolving priorities and responsibilities of audit committees (ACs) in 2025, emphasizing risk governance, technology integration, and investor expectations. 

Enhanced Risk Governance and Enterprise Risk Management Integration 

Today’s ACs are watching an evolving risk landscape impacted by significant geopolitical factors, continuing supply chain disruptions, global inflation, and the emergence of technology that for many companies may prove highly disruptive to their businesses. According to the BDO 2024 Board Survey of approximately 250 sitting directors, 31% identified enterprise risk management (ERM) as the governance process requiring the most significant time and effort over the next 12 months. Today’s dynamic risk environment, coupled with regulatory (e.g., SEC) and stakeholder expectations, require corporate risk assessments to cover the entire enterprise, not just financial reporting. A recent Audit Committee Practices Report found that 47% of respondents assigned ERM oversight to the AC, 15% to a risk committee, and 35% to the full board. ERM is expected to be an integrated, holistic process that considers all manner of risks to the organization (e.g., strategic, regulatory, operational, and reputational). Regardless of the express responsibilities within the board and committee charters, all board members are expected to exercise skepticism and be risk aware. 

Governance Structure and Composition   

The combined structure and composition of the board plays a crucial role in risk governance. AC members have a significant responsibility in reviewing and overseeing risk factors as part of their mandate to oversee the financial reporting function, and their directive often extends to oversight of the ERM process as well. This requires well-informed directors who understand not simply financial accounting but have relevant experience and deep industry knowledge about the company’s specific risk factors and the experience to make judgments about how well management is identifying, prioritizing, and managing risks. For example, consider the adequacy of an AC that has the additional responsibility for cyber risk oversight that is composed solely of financial experts who may have no current understanding of the cyber risk landscape or impact of emerging technology on the protection of data to ask informed questions of management about risk detection and mitigation strategies. 

Leading Practices for Board/Committee Oversight  

The board should be responsible for setting and clearly articulating risk appetites and tolerance thresholds and ensuring management is operating within those boundaries. There are several steps directors should take to advise management on risk and strategic priorities. These include: 

• Establishing incentives to provide accurate reporting on risks to the organization 

• Remaining forward thinking and open minded as the business environment rapidly changes 

• Prioritizing ongoing education, including inviting experts into the boardroom (e.g., economists, cyber specialists, technologists, and others) 

• Taking a hands-on approach by engaging with stakeholders, leveraging technology, and performing site visits 

The AC’s oversight of ERM goes beyond oversight of management’s processes to stress testing those results to help ensure priorities are aligned, mitigation efforts are sound, and the company can be resilient against new challenges. The AC should not only review the formal ERM processes performed by management but receive further reporting and updates at an established cadence throughout the year to enhance recurrent risk conversations. The Audit Committee Practices Report indicated 49% of boards discussed ERM monthly, as opposed to the 28% and 20% who add it to the agenda semiannually and annually, respectively. Effective risk conversations have several key characteristics that include considering the company holistically, incorporating the organization’s strategy and planning processes, and collaborating with professionals throughout the organization. Additionally, these conversations may benefit from this list of questions every board should ask about risk management. 

Risk Mitigation and Preparedness  

Much like our own immune systems, organizations are much better prepared to respond to risks if they are generally healthy. If the fundamentals of a business are strong and if potential shocks to the system have been considered and prepared for in advance, the business will be much better positioned to survive.  However, in today’s fast-paced business environment, the speed at which risks can materialize has a significant impact on risk management, often requiring response within minutes rather than overnight. Boards should consider whether management is prepared to identify rapidly materializing risks and react swiftly to disruptions. Resilience programs such as business continuity, IT disaster recovery, and cyber incident response programs should be adequately resourced and include formal documented processes and responsibilities, scenario planning, and crisis simulations that are updated regularly. 

Governance Oversight Priorities   

BDO’s 2024 Board Survey identified the activities directors expect to spend the most time on next year: 

Specific Governance Activities to Strengthen Both Management and the Board 

Conclusion 

Effective risk management and resilience through ERM integration are essential for navigating the complexities of the modern business environment. By adopting leading practices, aligning with strategy, and prioritizing forward-thinking approaches, ACs can enhance their oversight capabilities and help ensure the long-term success of their organizations. 

Emerging Technology and Cybersecurity 

The expanded use of technology is transforming business operations, reducing costs, and enhancing human capabilities. The challenge organizations face is balancing innovation with risk management, focusing on efficiency, productivity, cybersecurity, data governance, and human capital impacts. 

Governance Structure and Composition 

The 2024 BDO Board Survey shows the priority emerging technology and cybersecurity have in boardrooms today. Directors identified “advancing the use of emerging technology” as the second most important strategic priority and “lagging implementation of emerging technologies” as one of the most significant risks. Cybersecurity was also in the top five strategic priorities and significant risks. Additionally, 50% of directors plan to increase investments in emerging technologies, and 41% intend to boost cybersecurity investment over the next 12 months. While some organizations may create additional board committees for technology and/or cybersecurity, many consider the AC the appropriate committee to oversee these areas, given its familiarity with the need for strong implementation and internal control environments designed to protect the integrity of information being used and generated by the company.  

As boards formalize their oversight response to evolving technology, they should consider committee capacity and expertise. According to the recent Audit Committee Practices Report, 58% of AC’s have cyber responsibility, followed by 25% retaining oversight at the full board level. Seventy-three percent of directors report discussing the topic quarterly, followed by 15% semiannually. Similar to the evolution of sustainability oversight, technology is integrated throughout the corporate environment (e.g., human capital systems, operations, supply chain management, third-party risk, and financial reporting). Collaborative oversight will be essential and may require assignment to one or more board committees depending on the significance and pervasiveness of the risks. 

There is an ongoing debate about whether to bring subject matter experts onto the board or to cultivate director “generalists” supported with focused continuing education, with no definitive best practice emerging. For example, while the SEC dropped its proposed requirement to disclose whether cybersecurity expertise existed within the board, the board may determine that having a cyber expert among them may still be warranted. However, we caution about deferring responsibility for significant risks to a single board member. There is also growing support for all directors to be “technology and cyber literate,” much like they should be financially knowledgeable, with many boards encouraging directors to achieve and maintain certifications in these and other significant risk areas. 

In response to the SEC’s cybersecurity disclosures, directors report obtaining external assessments and creating internal processes as the top two areas for improvement in their oversight of cybersecurity. This includes understanding what cyber incidents may be considered material to the business and how prepared the organization is to respond timely and effectively to a cyber incident when it occurs. Consider additionally Questions Directors Should be Asking in Their Oversight of Cyber Risk. 

What is certain is that directors should continue to educate themselves in emerging and dynamic areas, including AI/generative AI and cybersecurity to continue to inform appropriate dialogues with management and auditors. Subject matter specialists may be invited to board and committee meetings to provide education to bolster collective board knowledge and address identified director skill and knowledge gaps, as well as serving as trusted advisors. Often, while these sessions may be requested by the board or AC chair, many boards encourage attendance by all directors and certain members of management.  

Oversight of Generative AI 

Board oversight of generative AI should be considered as part of the broader ERM mandate. From recognizing strategic benefits to mitigating associated risks, the board can embrace AI by establishing a safe environment and a culture of trust that accelerates innovation while promoting long term success. The board of directors further plays a pivotal role in guiding the responsible and ethical use and strategic deployment of generative AI. The board may consider establishing a cross-functional AI team that includes the CIO, CISO, general counsel, and operations providing regular reporting to the board or oversight committee. 

From an AC perspective, many finance teams are identifying efficient AI use cases to help analyze financial information, detect trends, and identify anomalies in large data sets. By the same token, auditors are incorporating AI into their auditing methodologies and tools to drive efficient and effective audits and address audit risk.  

Regulators from government to industry are also keenly focused on the role that emerging technologies play in shaping business opportunities and risks to consumers and stakeholders. We encourage the AC to remain attentive to developing rules and regulations that may impact how their business chooses to integrate and use technology and the impact those choices may have on their stakeholders.  

Questions directors should be asking in their oversight of generative AI. 

• What are the company’s policies around the ethical use of technology? How are those policies monitored, and how often are they reviewed and revised? 

• What is the process for identifying effective use of generative AI? Is the organization monitoring industry and competitor uses? Do these uses align with strategic objectives and business goals? 

• What is the process for adopting innovative technologies from identification to selection, implementation, education to monitoring and compliance? Who is responsible and accountable? 

• What monitoring and compliance controls exist? How are instances of noncompliance reported and remedied? 

• What are the risks associated with generative AI use, and what controls are in place to mitigate these risks?  

• What controls does the company have around the reliability, accuracy, and consistency of its data? 

• How does the organization monitor (and who is responsible for) the regulatory environment to ensure compliance? 

• How is the company mitigating third-party risk? 

• How are we remaining current with respect to developing laws and regulations related to the use of AI?

AI Oversight in Financial Reporting and Use by the External Auditor 

With disclosure demand increasing, it is anticipated that stakeholders will expect similar information around technology governance and oversight to what they are receiving about cybersecurity. Directors should not only confirm the company has processes around technology risk management, strategy, and governance that are operating effectively, but also that the governance oversight is established, documented, reviewed, and revised frequently.  

A recent report The Rise of Generative AI In SEC Filings, states that almost two-thirds of Fortune 500 companies mention AI in their annual report on form 10-K, 11% specifically reference generative AI, and more than half have a risk factor citing AI. ACs should ensure consistent and balanced messaging on emerging technologies, considering the materiality to their business when making public disclosures, while also anticipating stakeholder demand for details on process and governance oversight. 

Underlying the financial statements, ACs should evaluate the impact of technology, including generative AI use in the financial reporting function. Three increasingly interdependent elements — technological efficiency, regulatory compliance, and talent — impact both corporate finance teams and audit engagement teams. Data governance challenges can increase the risk for potential reporting issues, errors, or unreliable insights. 

The PCAOB has started “limited outreach” to understand audit firm and public company perspectives on the integration of generative AI in audits and financial reporting. Findings suggest that the integration is falling behind operational and customer-facing areas for many companies, which was further supported by BDO’s recent Board Survey results. Similarly, while some audit firms have started to incorporate generative AI into their audits, it remains primarily for administration and research as firms proceed cautiously in their testing and vetting of innovative technologies. 

Meanwhile, stakeholder demand for adoption is high. BDO’s inaugural Audit Innovation Survey revealed that senior finance leaders say tech-savvy auditors increase trust and influence auditor selection, while acknowledging continuing challenges in audits as technology is implemented. More than two-thirds (69%) of respondents say established data governance and internal data management are a barrier to a smooth audit experience. ACs should continue to engage in discussion with external auditors, as well as internal auditors, around their use of technology, the associated benefits, and risks. 

The CAQ recently released a resource providing an overview of the technology and regulatory environment along with audit considerations for companies deploying generative AI. They also included sample use cases that may be useful for the AC in the evaluation and oversight of their own company’s generative AI deployment. 

Investor Expectations of Audit Committee Effectiveness 

The AC’s effectiveness is vital for robust corporate governance and investor confidence. While ACs are often assigned expanding responsibilities, they must not fall behind on the traditional mandate of their role. It is important to clearly define and regularly review the AC’s responsibilities and associated charter to ensure compliance with requirements, along with assessing the capacity and experience around expanded oversight responsibilities. 

Questions ACs should be asking about fulfilling investor expectations: 

• Is the AC fulfilling its requirements per applicable rules and regulations? 

• How does the AC determine effectiveness and independence of the external auditor? 

• Is our ERM process fit for purpose with respect to identifying and prioritizing emerging areas of risk? 

• Does the AC inquire about “close calls” – e.g., areas of focus by the external auditor that were considered but didn’t rise to the level of a CAM?  

• If applicable, is management’s remediation of deficiencies being done timely and effectively? 

• How is the AC leveraging internal audit (IA) for value creation and risk mitigation? 

• How often does IA revise their audit plan and update the AC on any deficiencies found? 

• What are the qualifications and experience of the IA team? 

• How is the AC ensuring collaborative input into the company’s disclosures? 

• What disclosure controls are in place, and how does the AC monitor effectiveness? 

• To what depth does the AC review, challenge, and approve items ancillary to the earnings release? 

• Do any/all directors sit in on earnings calls? 

• How does the AC ensure consistency around the company’s internal and external messaging? 

• How are AC members staying current with rules, regulations, and environmental trends? 

• What are the AC’s responsibilities beyond the core requirements, and does the AC have the capacity and experience to execute on them? 

• Does the company’s finance function need additional support? How and when was a gap analysis performed?

Oversight of Internal Audit 

Leveraging IA effectively can provide significant insights into the company’s operations and risk management processes, including emerging and high-priority areas such as AI, cybersecurity, and controls around non-financial data (e.g., sustainability metrics). The Institute of Internal Auditors has issued new Global Internal Audit Standards, effective January 9, 2025. These standards are designed to guide the professional practice of internal auditing and serve as a basis for evaluating the quality of the IA function by those in oversight roles (e.g., ACs). While not mandatory, the standards offer 15 guiding principles and essential conditions (i.e., activities of the board and senior management) that enable effective internal auditing. ACs can facilitate indispensable value from their IA function in several ways, such as: 

• Aligning expectations with the IA mandate 

• Setting clear IA authority, roles, responsibilities, and scope of services 

• Building an open and trusting relationship 

• Understanding the risk assessment process 

• Equipping IA with adequate resources and tools 

• Promoting the IA function 

• Assessing the performance of the Chief Auditing Executive (CAE) and IA function 

• Requiring the maintenance of a current IA charter for approval 

Best practices for the oversight of IA include regular reports to the AC to ensure continued alignment on audit strategy and goals, along with timely resolution of identified deficiencies before they become material issues. The PCAOB has also taken interest and added a mid-term project to consider updates to Auditing Standard 2605, Consideration of the Internal Audit Function. See the BDO Internal Audit Webinar Series and upcoming BDO in the Boardroom Podcast for discussions around emerging topics and best practices within the IA function. 

Oversight of Financial Reporting 

The AC plays a vital role in overseeing financial reporting quality and controls. Recent studies from Ideagen Audit Analytics and the Center for Audit Quality indicate that the number of financial restatements filed by SEC-reporting companies is at or near historic lows, likely the result of continued diligence around emerging risks and robust internal control environments. The AC should remain vigilant in these areas and sensitive to the impact macroeconomic and geopolitical factors will have on their companies, including but not limited to: political elections and potential changes in legislation, geopolitical and economic indicators ( e.g., inflation, interest rate changes, supply chain disruption, changes in tariff policies, war impacts) along with human capital matters associated with cultivating and retaining a skilled finance workforce.  

Regulatory Landscape 

The regulatory landscape is continually evolving, with robust SEC and PCAOB rulemaking agendas, enforcement actions, inspection findings, and litigation continuing to make headlines. The AC must stay informed about these changes and ensure compliance with new regulations, consider priority regulatory areas, and monitor the impact of legislation, as well as an upcoming transfer of executive power in the U.S. 

The PCAOB has prioritized transparent communication and continues to issue Investor bulletins, audit focus, and spotlight publications that ACs are encouraged to monitor. Some recent examples include the PCAOB’s information about their inspection activities that include observations, inspection activities from the past year, and inspection priorities for the upcoming year that can inform ACs in their oversight of the financial reporting and audit processes. The SEC also releases examination priorities and makes public recent comment letters issued to registrants.  

Fraud Risk 

Fraud risk evaluation and oversight are critical components of the AC’s responsibilities, and the current environment constitutes a heightened risk for organizations, including digitally enabled fraud. The PCOAB recently paused its significant proposed Noncompliance with Laws and Regulations (NOCLAR) auditing standard, but ACs should continue to stay informed and involved in this and other rule and standard setting. See the 2024 BDO Board Survey and the PCAOB’s recent Spotlight for discussion around solidifying a culture of compliance.  

Board’s Actions to Prevent and Detect Fraud 

Disclosure 

Recent SEC enforcement has focused on the adequacy of company disclosure controls under Exchange Act Rule 13a-15 and emphasized the need for comprehensive disclosure controls. The Division of Corporation Finance also continues its Disclosure Review Program. ACs should be aware of cited trends — e.g., misleading non-GAAP measures and ransomware attack disclosures — to ensure their company’s own alignment with regulatory expectations. 

Companies may consider maintaining a well-structured disclosure committee, which includes diverse management representation from various departments such as accounting, finance, IT, cyber, sales, and general counsel. ACs should monitor the disclosure committee’s recommendations to ensure transparency and regulatory compliance. Additionally, the AC should discuss disclosure of material judgments to understand exclusions and evaluate the necessity of included information. 

Disclosure alignment should be a priority in AC discussions, ensuring company-wide collaboration and consistency across sources that broadly include (but are not limited to) financial statements, MD&A, earnings releases, proxy statements, company websites, sustainability reporting, and marketing materials. ACs should frequently scrutinize noted comment letter areas and emerging risks, as applicable, such as: 

• China-related matters 

• Non-GAAP measures 

• Critical accounting estimates 

• MD&A 

• Revenue recognition 

• Financial statement presentation 

• Market disruptions 

• Cybersecurity 

• Supplier finance programs 

• Inflation 

• Other related rules (e.g., pay for performance) 

The AC should inquire about the rigor for how disclosures outside the financial statements (such as those related to earnings releases and sustainability reports) are verified for accuracy and consistency, including reviewing presentation slides and management’s commentary, while overseeing internal controls around non-financial metrics. 

The SEC recently disbanded their Climate and ESG Task Force stating the priorities were determined to be well integrated into overall company strategy and risk management. Additionally, the SEC’s new climate rules remain stayed and the issuance of anticipated new human capital rules are in question given the pending U.S. election transition. However, ACs should not lose focus as jurisdictions globally and locally are moving forward with significant reporting requirements that may impact a broad group of U.S. companies and will require significant action by management and oversight of the AC. ACs should discuss the emerging ESG disclosure landscape and company controls that are in place to monitor compliance as well as stakeholder sentiment, remaining attuned to verifiable data that reflect actual practices and do not mislead investors. 

Finance Function Talent Management 

The experience, effectiveness, interactions, and reporting of professionals in the accounting and finance functions serve as an important control in the oversight of financial reporting that the AC receives. In an environment where the war for talent continues, ACs should ensure they are evaluating resources and supporting the needs of the finance function in their companies.  

Oversight of the External Auditor 

Audit quality stems from the AC’s ability to exercise professional skepticism, including challenging assessments and estimates made by auditors and management. It is considered a best practice to build a strong professional relationship with their external auditors, which includes frequent, transparent communications about the audit, including:  

• Auditor independence 

• Scope, status and conduct of the audit,  

• Audit team and the audit firm including engagement team members’ experience, supervision and review,  

• Firm structure and potential impact on audit quality 

• Recent inspection results at the engagement level and at the firm level, and 

• Firm’s system of quality control  

See the PCAOB’s recent Audit Focus: Audit Committee Communications for reminders and common deficiencies in this area.  

SEC’s Office of Chief Accountant Paul Munter released this statement on the recent increase in deficiency rates found in audit inspections and the importance of the role of the AC in ensuring high-quality audits. 

The PCAOB has been active in its rulemaking intended to support the AC’s responsibility in oversight of the auditing function and selection and retention of auditors. This includes the recently adopted standards regarding the audit firm’s system of quality control, required firm reporting, and firm and engagement metrics, which at the time of publication are still awaiting SEC approval. Directors should remain knowledgeable about auditing standards and how those standards may impact the AC’s and management’s engagement with the auditors. Similarly, they should carefully consider proposed standard setting regarding the scope and procedures of financial statement audits, such as the PCAOB’s (NOCLAR) rules. A recent roundtable briefing paper may further impact how the auditor engages with the company, along with the types of controls and additional information that may become a required component of public company audits in the future. 

In September 2024, the PCAOB issued a spotlight focused on recent inspection deficiency findings with respect to auditor independence requirements and highlighted considerations for the AC particularly around its responsibility for the pre-approval of audit firm services, including but not limited to: 

• ACs are required to consider whether any services provided by the audit firm may impair the audit firm’s independence in advance. 

• ACs should consider whether the public company’s policies and procedures require that all audit and non-audit services are brought before the AC for pre-approval.  

• ACs should consider whether their auditor has implemented processes to identify prohibited relationships.  

• If the AC pre-approves services using pre-approval policies and procedures, the AC should consider whether the pre-approval policies and procedures are sufficiently detailed as to the particular services to be provided so that the AC can make a well-reasoned assessment of the impact of the service on the auditor’s independence.  

• Independence is a shared responsibility between the entity under audit, its AC, and its auditor. It is important for the company to have policies and procedures to proactively alert auditors to proposed or pending merger and acquisition activity that could have an impact on auditor independence. 

BDO is poised to release an audit committee pre-approval guide aid in early 2025 to be posted within the practice aid section of the BDO Center for Corporate Governance. 

As the regulatory environment continues to advance at a quick pace, ACs are being encouraged by regulators, auditors, and other stakeholders to be more engaged in the rulemaking and standard-setting process, as well as to remain active in the community establishing and discussing best practices. The PCAOB continues to be especially active in their board outreach and annually publishes high-level observations and key takeaways from their conversations with AC chairs. 

Conclusion 

The AC’s effectiveness is crucial for maintaining investor confidence and ensuring robust corporate governance. By fulfilling its mandate, adapting to evolving risks, overseeing the external and internal audit functions, evaluating significant risks (including potential fraud and emerging risks), and staying informed about regulatory changes, the AC can significantly contribute to the company’s success and the delivery of high audit quality to the markets. 

Written by Mike Stevenson, Amy Rojik and Lee Sentnor. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Can Help 

MGO can provide significant support to audit committees as they navigate their evolving priorities in 2025 through integrating ERM processes and addressing the dynamic risk environment that includes geopolitical factors, supply chain disruptions, and technological advancements. Our team can also assist in assessing and enhancing the composition of your board and audit committees to make sure your members have the relevant experience and industry knowledge necessary for effective oversight. Lastly, we can equip you with guidance on best practices for that board and committee oversight. Contact us to learn more.  

The post Top Audit Committee Priorities for 2025  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Tariffs increase costs for businesses, often leading to higher consumer prices, lower profit margins, or supply chain adjustments.

• Importers pay tariffs at customs, but businesses and consumers ultimately bear the financial burden through higher costs.

• Companies can reduce tariff exposure by diversifying suppliers, improving transfer pricing, and using trade agreements.

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There’s a lot of talk about tariffs these days. Here’s a quick primer on how they work, how they can affect your business, and potential strategies to reduce their financial impact.

What Are Tariffs?

Tariffs are taxes imposed by governments on imported goods, often intended to protect domestic industries, generate revenue, or respond to trade disputes. While they serve as a tool of economic policy, tariffs create real financial consequences for businesses — affecting pricing, supply chains, and profitability. They can also influence trade relationships between countries, leading to retaliatory tariffs that further disrupt global commerce.

For companies engaged in international trade, it’s critical to understand tariffs to manage costs and stay competitive. The financial impact of tariffs depends on many factors — including the countries involved, the type of goods being imported, and whether trade agreements offer relief.

How Tariffs Affect Businesses

Tariffs can significantly impact costs and operations, particularly for businesses that rely on imported goods. Higher expenses often result in increased consumer prices, lower profit margins, or shifts in sourcing and supply chain restructuring to reduce exposure.

For example, if a U.S. company imports raw materials from Canada, a 25% tariff on those goods raises production costs. The company must then decide whether to pass these costs on to customers, absorb them, or seek alternative suppliers. Over time, tariff-related costs can reshape supply chains, pricing strategies, and profitability.

Who Pays for Tariffs?

Although tariffs are imposed by governments, businesses and consumers ultimately bear the financial burden. Importers pay the tariff at customs, but the costs often get passed down the supply chain, leading to higher retail prices. In highly competitive industries, businesses may struggle to raise prices without losing customers — making it necessary to find other ways to offset the added expense.

While shifting supply chains away from China has been a common response to rising tariffs, the reality is more complex. Many countries that could serve as alternative manufacturing hubs lack the infrastructure or scale to quickly support demand across industries. And because tariff environments are highly unpredictable — shaped by shifting political priorities and international negotiations — these countries are often hesitant to invest in new production capabilities.

There is widespread concern that tariffs on Chinese goods could be reduced just as quickly as they were imposed, prompting U.S. businesses to return to China for its established manufacturing base, cost efficiency, and consistent service. This uncertainty makes long-term sourcing decisions more difficult, reinforcing the need for flexible, responsive supply chain strategies.

Industry-Specific Tariff Impacts

While tariffs affect nearly all industries engaged in global trade, some sectors are more exposed than others.

Construction and Real Estate

The U.S. currently imposes a 14.54% tariff on Canadian softwood lumber (as of August 2024). When combined with anti-dumping and countervailing duties, the effective tariff rate on Canadian lumber approaches 40%. This tariff impacts the construction and real estate  industry by increasing construction costs, making housing and commercial development more expensive. Canada has challenged these duties, arguing they harm the Canadian timber sector, while the U.S. defends them as necessary to counter government subsidies.

In addition to lumber, other key construction materials such as steel and aluminum are also subject to tariffs. Steel prices have increased 15% to 25% since January, and aluminum is up 8% to 10%, driven in part by market anticipation of expanded tariff measures. Overall, the cost of building materials has risen by 34% since December 2020 — placing sustained financial pressure on developers and contractors. The current administration has signaled plans to double existing tariffs on Canadian lumber to 34.5%, a move that could further escalate building costs and intensify U.S.-Canada trade tensions.

Manufacturing and Distribution

Tariffs affect the manufacturing and distribution sector by increasing the cost of imported inputs, components, and equipment. From industrial machinery to essential raw materials like steel, aluminum, and chemicals, tariff rates — which can range from 2% to 25% depending on the product and country of origin — create added financial pressure across production lines. These costs impact both domestic manufacturers and U.S. distributors who depend on global suppliers to remain competitive.

In today’s shifting trade landscape, companies must remain nimble, adapting quickly to supply chain disruptions, pricing volatility, and shifting sourcing opportunities. While some have pursued reshoring or diversified their supplier base, the unpredictability of tariff policies continues to demand flexible, forward-looking planning.

Cannabis Industry

Although cannabis is not yet legalized at the federal level in the U.S., businesses involved in cultivation, packaging, and equipment sourcing still feel the effects of trade policies. Many cannabis companies rely on imported materials — such as LED lighting, vape hardware, and specialty fertilizers. Tariffs on Chinese-made products have significantly raised costs, affecting dispensary pricing and profit margins. Some companies have looked to move manufacturing or negotiate better sourcing agreements to offset these expenses.

Food and Wine

The food and beverage industry faces substantial challenges due to tariffs, particularly in the import of ingredients, packaged foods, and alcohol. Nearly 60% of fruits and nuts consumed in the U.S. are imported, along with significant portions of grains, sweeteners, and vegetables. Tariffs on these goods contribute to rising food prices — affecting restaurants, grocery retailers, and supply chains.

Wine imports have also been hit by tariffs, leading to higher costs for restaurants and retailers. Recent policy changes have raised import duties on European wines, driving up prices for both businesses and consumers. This has forced some companies to explore domestic alternatives, though sourcing shifts take time and may not fully offset cost increases.

How Businesses Can Mitigate Tariffs

Companies can take proactive steps to manage tariff exposure and reduce financial strain, including:

• Supply chain diversification: Sourcing materials from tariff-free regions or shifting production locations can help reduce costs and limit exposure to trade disputes.

• Transfer pricing strategies: Adjusting intercompany pricing structures for international transactions may offer tax efficiencies and improve cash flow management.

• Trade agreements and policy advocacy: Staying informed on trade regulations and using agreements can provide relief, while engaging with policymakers may help shape favorable outcomes.

Final Thoughts

Tariffs are a key factor in global trade — influencing pricing strategies, supply chains, and financial planning. For businesses engaged in international commerce, understanding and managing tariff exposure is no longer optional; it’s essential. One of the greatest challenges companies face is not just the cost of tariffs themselves, but the uncertainty surrounding them. Rates can shift quickly, timing of implementation is often unpredictable, and geopolitical tensions or trade negotiations can introduce rapid changes in policy. This lack of consistency makes it difficult for businesses to forecast costs, manage inventory, or make long-term investment decisions.

Developing strategies to manage these risks — whether through supply chain diversification, transfer pricing adjustments, or using trade agreements — can help reduce the financial impact and build operational resilience. By staying informed and preparing for multiple scenarios, businesses can better adapt to a volatile trade environment and avoid being caught off guard.

How MGO Can Help

We provide strategic tax and advisory services to help your business navigate the complexities of international trade. Our team offers insights that support smarter decision-making.

The post How Tariffs Impact Business Operations appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Key Takeaways:

• Early tax planning is crucial to avoid costly mistakes and improve your U.S. market entry.
• Carefully evaluate entity structure, supply chain, and transfer pricing strategies.
• Engage with experienced legal and tax professionals to guide your U.S. expansion.

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Foreign direct investment (FDI) in the United States continues to grow, underscoring the country’s appeal to global businesses. However, this influx of investment also highlights the critical need for thorough pre-arrival tax planning. Proper planning is essential for navigating the complexities of the U.S. tax landscape and achieving a smooth and successful entry into the U.S. market.

Importance of Planning Before Entering the U.S. Market

The growing interest in the U.S. market among international investors makes it even more crucial for businesses to engage in comprehensive tax planning before entry. The U.S. tax system is multifaceted, with multiple layers of federal, state, and local taxes — each with its own set of regulations.

For foreign businesses, understanding these complexities early on is vital for mitigating tax liabilities and keeping compliance. Without a robust pre-arrival tax strategy, your company may face unexpected tax burdens, penalties, and operational challenges that could hinder your success in the U.S.

Checklist for Pre-Arrival Planning

Before entering the U.S. market, your business should follow a comprehensive checklist that addresses critical tax and operational considerations. Here are some of the key steps:

Decide the Appropriate Entity Structure

• C corporation or LLC (limited liability company): Given the ongoing growth in FDI, selecting the right business entity is crucial to capitalizing on the favorable investment climate in the U.S. A C corporation may be beneficial for companies looking to raise capital through equity, while an LLC offers flexibility and potential tax advantages.

• Branch, subsidiary, or no taxable presence: Foreign businesses must decide whether to operate as a branch of the parent company or set up a subsidiary in the U.S. Each choice has different tax implications and operational challenges. Another option, if planned appropriately, could be to sell in the U.S. without creating a taxable presence. This can be achieved by conducting limited activities or relying on a U.S. income tax treaty to avoid creating a permanent establishment in the U.S.

• Joint venture or partnership: Some foreign businesses choose to partner with an existing American company to more quickly pierce the market. This option can provide a more systematic and flexible path to U.S. market entry.

Analyze Supply Chain Implications

• Customs duties and tariffs: Understand the impact of U.S. customs duties and tariffs on imported goods. Proper supply chain planning can help minimize costs and avoid delays.

• Logistics and distribution: Evaluate the most efficient logistics and distribution channels for your products in the U.S., considering factors such as warehousing, shipping costs, and regional demand. With FDI driving increased competition, improving your supply chain can provide a critical advantage.

Develop a Transfer Pricing Strategy

• Compliance with Internal Revenue Service (IRS) guidelines: Price intercompany transactions according to arm’s length principles to follow IRS transfer pricing regulations. This is especially important for businesses with significant cross-border and/or cross-state transactions.

• Documentation requirements: Keep thorough documentation of transfer pricing policies and transactions to avoid penalties during an IRS audit.

Understand State and Local Tax Obligations

• Nexus considerations: Determine where your business has nexus for sales and use tax, income/franchise tax and other tax — whether through physical presence, economic activity, or other factors — since this will dictate your state and local tax filing obligations.

• Sales tax compliance: Register for sales tax collection in jurisdictions where your business has nexus and follow state-specific sales tax regulations.

Address Benefits and Payroll Requirements

• Health insurance and retirement plans: Understand U.S. regulations on employee benefits, including health insurance and retirement plans, which may differ significantly from those in other countries.

• Payroll taxes: Prepare for U.S. payroll tax obligations, including Social Security, Medicare, and federal and state unemployment taxes.

Engaging with Legal and Tax Professionals

Working with experienced legal and tax professionals is critical to successfully navigating the complexities of the U.S. tax system. These professionals can provide you tailored advice based on your specific business needs, helping you avoid common pitfalls and improve your tax strategy.

How to Choose the Right Advisors

• Experience and knowledge: Look for advisors experienced in U.S. tax law, particularly those specializing in international and state and local tax issues who have a deep understanding of the industries in which you operate.

• Proven track record: Seek out professionals with a proven track record of helping foreign businesses successfully enter the U.S. market. Client testimonials and case studies can be valuable indicators of their capabilities.

• Collaborative approach: Choose advisors who will work closely with your in-house team and your other consultants to develop a cohesive strategy that addresses all aspects of your U.S. market entry.

Position Your Business for a Seamless U.S. Market Entry

With the U.S. continuing to attract significant FDI, your business must be well-prepared to enter the market. Pre-arrival tax planning is key. By carefully considering entity structure, supply chain logistics, transfer pricing, and state and local tax obligations, you can position your business for long-term success in the U.S.

How MGO Can Help

Entering the U.S. market can be complex, but you don’t have to navigate it alone. Our assurance, tax, and consulting professionals — including International Tax and State and Local Tax teams — are here to guide you through every step of the process.

Reach out to our team today to learn how we can help your business plan strategically to achieve a smooth U.S. market entry.

The post Your U.S. Market Entry Pre-Arrival Tax Planning Checklist appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Key Takeaways:

• Plan for U.S. employee benefits — they differ greatly from other countries and require employer management.
• Choose the right U.S. location to improve coordination, tax benefits, and operational efficiency.
• Secure proper insurance and banking solutions to avoid common challenges faced by foreign businesses in the U.S.

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Expanding into the United States is a strategic move that offers your business significant opportunities for growth — particularly as the U.S. continues to attract substantial foreign direct investment (FDI). Recent data highlights the U.S. as a leading destination for global businesses, but companies entering the U.S. market still face a host of operational challenges. Careful planning and a thorough understanding of the regulatory and logistical landscape are crucial for a smooth transition.

This article delves into the operational considerations your business must address when expanding into the U.S. — focusing on employee benefits, coordination, supply chain management, insurance, and banking.

Importance of Operational Planning

Effective operational planning is the cornerstone of a successful expansion into the U.S. market, especially as FDI continues to drive economic growth in the region. This planning involves not only understanding the regulatory environment but also anticipating challenges related to employee management, supply chains, insurance, and financial operations. Inadequate planning can result in significant delays, increased costs, and potential legal issues — which can be particularly detrimental in a competitive market increasingly influenced by global investment.

Employee Benefits and Regulations

When expanding to the U.S., your company must navigate a complex landscape of employee benefits and regulations — which differ from those in your home country. In many sectors that are seeing increased FDI, such as manufacturing and technology, understanding and managing these benefits is critical to attracting and retaining top talent in the competitive U.S. job market.

• Differences in Employee Benefits Between the U.S. and Other Countries: In many countries, such as those in the European Union, employee benefits like health insurance and retirement plans are often managed or mandated by the government. However, in the U.S., these benefits are typically the responsibility of the employer. This shift can be surprising for foreign companies, requiring a thorough understanding of U.S. labor laws and regulations.
• Health Insurance, Retirement Plans, and Other Benefits: U.S. employers are generally expected to provide health insurance as a standard benefit — with medical, dental, and vision benefits often requiring contracts with separate insurance carriers. Employers must typically cover 50% of insurance costs (though minimum coverage varies by state). Many companies also offer retirement plans such as 401(k)s. Navigating the selection and administration of these benefits can be challenging, particularly for small- or medium-sized enterprises. You may need to consult with benefits professionals to stay compliant with U.S. regulations and remain competitive in the job market.

Logistics and Supply Chain Management

Managing U.S. operations efficiently requires careful consideration of location, coordination, and infrastructure needs. Strategic decisions about operational setup can have a notable impact on your overall business success.

• Choosing the Right Location for Operations: The U.S. is a vast country with significant regional differences in cost, labor availability, and infrastructure. Selecting the right location for your operations can affect everything from shipping costs to employee satisfaction. For instance, companies focused on manufacturing might prefer regions with lower labor costs and favorable tax treatments; those in distribution might prioritize proximity to major logistics hubs.
• Shipping and Inventory Management: Efficient shipping and inventory management are essential to support product flow and meet customer expectations. Foreign companies in the U.S. often rely on third-party providers to manage these aspects — especially if they lack a physical presence. However, this can create tax obligations in multiple states, as having inventory in a state may trigger state and local tax filing requirements.
• Obtaining the Necessary Insurance Coverage: Foreign companies often discover their existing insurance policies do not cover their U.S. operations. It’s crucial to secure the appropriate insurance coverage — either through global policies that extend to the U.S. or by obtaining new policies tailored to U.S. risks. Your coverage needs may include general liability, property, product liability, workers’ compensation, and employment practices liability depending on the nature of the business.
• Challenges in Opening Bank Accounts: Opening a bank account in the U.S. can be a complex process for foreign-owned businesses. Some banks may be hesitant to provide accounts or offer credit facilities to companies without a U.S. presence or substantial collateral. This can limit access to credit and other financial services, making it essential to plan financial operations carefully.

Setting Your Business Up for U.S. Success

Expanding into the U.S. market requires careful consideration of various operational factors — from employee benefits and logistics to insurance and banking. As the U.S. continues to attract substantial foreign direct investment, it is critical to understand and address these challenges to be competitive and position your business for successful growth. By planning accordingly, you can capitalize on the opportunities presented by this dynamic market.

Ready to launch your U.S. expansion? Reach out to our team today to learn how we can help support your operational planning efforts.

Setting up a business in the U.S. requires thorough planning and an understanding of various regulatory and operational challenges. In this series, we will delve into specific aspects of this process, providing guidance and practical tips. Our next article will explore the complexities of navigating states and local taxes.

The post Prepare for These Key Operational Challenges With Your U.S. Expansion appeared first on MGO CPA | Tax, Audit, and Consulting Services.