What Is Sanctions Forecasting, and How Can Companies Use It to Identify Future Sanctions?

Article Highlights:

• There are currently around 15,000 entities targeted by U.S. sanctions. 
• Many sanctions lists are dynamic, with updates occuring on an annual, quarterly, and even monthly basis, often with little to no notice.
• Sanctions Forecasting is an SCRM methodology that enables businesses to identify potential persons, organizations, or properties at risk of being targeted by major government sanctions before they are officially imposed.
• By utilizing Sanctions Forecasting in a risk management strategy, companies can evaluate suppliers for risk early on and make contract provisions where necessary.
• Z2Data’s Sanctions Watchlist tool helps manufacturers identify businesses at risk of being sanctioned and how potential sanctions could directly impact their suppliers.

Although it hasn’t made headlines the way other international events and incidents have, the number of sanctions has been steadily growing since the early stages of the 2010s. This is especially true in the U.S. 

America’s Wholehearted Embrace of Sanctions

Dating back to at least the Obama administration, the U.S. government has been ramping up the number of countries, businesses, and individuals subject to American sanctions. As a recent Washington Post article detailed, the United States “imposes three times as many sanctions as any other country or international body, targeting a third of all nations with some kind of financial penalty on people, properties or organizations.”

To put this trend in more concrete statistical perspective, there are currently around 15,000 companies, people, and other legal entities appearing on one of the U.S.’s litany of sanctions lists. These lists are overseen by a number of major federal agencies, including the State Department, the Department of Homeland Security (DHS), the Department of Commerce, and the Bureau of Industry and Security. 

To put this trend in more concrete statistical perspective, there are currently around 15,000 companies, people, and other legal entities appearing on one of the U.S.’s litany of sanctions lists.

The 11 Most Important Sanctions Lists for Businesses

While there are a myriad of these lists housed within at least a half-dozen different departments and agencies, 11 arguably loom the largest for U.S. manufacturers, importers, and other businesses. 

• BIS Unverified List
• BIS Entity List
• BIS Denied Persons List (DPL)
• BIS Military End User List (MEU)
• National Defense Authorization Act (NDAA) Section 889
• National Defense Authorization Act (NDAA) Section 1260H
• National Defense Authorization Act (NDAA) Section 5949
• US Sanctions List (OFAC)
• UFLPA Entity List
• Nonproliferation Sanctions (ISN) List
• ITAR Debarred (DTC) List

The Challenge of Tracking Existing Sanctions

Just getting ahold of these lists can be a challenging step. For large companies with dedicated staff and long-time industry experience, knowing which lists to track might be easy. But for others, knowing these lists exist at all—and if so—where to find them can be daunting. 

Read Also: The Key Sanctions Lists Every U.S. Company Should Know About - Z2Data

Once you have access to the lists, reading through them presents its own kind of headache. Readers trying to understand their scope of responsibility may find themselves spending hours pouring over lengthy documents trying to make sense of legalese and what actions they should take in response. 

There’s also the fact that many of these lists are dynamic. Some lists add new names on an annual, quarterly, and even monthly basis, with updates seemingly unpredictable in nature. 

There’s also the fact that many of these lists are dynamic. Some lists add new names on an annual, quarterly, and even monthly basis, with updates seemingly unpredictable in nature. 

But that’s not the end of it. 

When companies finally do find the lists, read through them, and understand their scope of obligation, a new challenge emerges: how are these entities connected to your business? While many companies are beginning to map their Tier 1 and Tier 2 suppliers post-COVID, very few truly know the hundreds–and potentially thousands–of sub tier suppliers that form their intricate supply chain from top to bottom. 

In short, the process of sanctions tracking and proactive management around them presents a complex and wholly difficult challenge for manufacturers looking to keep their supply chains clean. For many companies, taking these steps and doing them successfully will be a stretch on their resources.

Why Knowledge of Current Sanctions Isn’t Always Enough 

Still, sometimes even proactively monitoring sanctions lists isn’t enough. 

U.S. sanctions are continuously expanding. In 2023 alone, the Biden administration added 2,500 organizations, individuals, and other persons to its Specially Designated Nationals (SDN) List, a consolidated list of sanctions maintained by the Office of Foreign Asset Control (OFAC). The ever-evolving nature of these foreign-policy instruments presents a challenging obstacle for manufacturers and other U.S. companies that do business with international suppliers. 

In 2023 alone, the Biden administration added 2,500 organizations, individuals, and other persons to its Specially Designated Nationals (SDN) List, a consolidated list of sanctions maintained by the Office of Foreign Asset Control (OFAC).

If a federal agency suddenly announces tomorrow that a key manufacturer has been added to a sanctions list, companies with ties to them must scramble to navigate a potential slew of serious operational ramifications. No matter how proactively they watch each list, the nature of reacting after an entity has been added creates a reactive firestorm–one with potentially large and sudden ramifications. 

Legally forced to discontinue business with the newly sanctioned supplier, a firm could fall short of production targets, be forced to allocate significant resources to identifying a viable alternative, and run up its budget with a new, more expensive replacement manufacturer. 

In an era of pervasive and changing U.S. sanctions, reacting swiftly after a list is updated simply isn’t enough when it comes to proactive supply chain risk management (SCRM). 

In an era of pervasive and changing U.S. sanctions, reacting swiftly after a list is updated simply isn’t enough when it comes to proactive supply chain risk management (SCRM). 

If companies truly want to stay a step ahead, they need to know what entities will be listed before they appear. 

Enter a new kind of approach: Sanctions Forecasting. Drawing on existing sanctions information and high-level research and data analysis, this strategic SCRM measure can determine international entities at heightened risk of being designated for these onerous trade restrictions. 

But how does it work?

What Is Sanctions Forecasting?

Sanctions Forecasting is an SCRM methodology that enables businesses to identify potential persons, organizations, or properties at risk of being targeted by major government sanctions before they are officially imposed.

With Sanctions Forecasting, companies can effectively identify and mitigate potential risks before they become outright issues–giving them a big advantage when it comes to staying ahead of regulations. 

How Does Sanctions Forecasting Work?

Sanctions Forecasting utilizes a variety of resources to accurately predict which individuals, organizations, or properties may be added to sanctions lists. The methodology draws on a range of key resources and data points to make its predictions, including:

• Current SDNs and other targeted entities on U.S. sanctions lists.
• Government investigations and congressional reports.
• Breakdowns of U.S. and international sanctions by targeted countries.
• Highly detailed supply chain data, including direct suppliers, subtier manufacturers, and other supply chain relationships.
• Academic and NGO reporting with established influence on federal policymaking.
• Statistics on the prevalence of sanctions within individual industries.

By following the appropriate sources and utilizing a wide breadth of this information, supply chain risk management companies are able to produce effective, actionable forecasts of suppliers and other international firms with a high likelihood of being added to one of the U.S.’s sanctions lists. 

How Can Companies Benefit from Sanctions Forecasting?

While the benefits may seem obvious, it’s worth asking what specific tangible benefits Sanctions Forecasting confers to businesses. Accruing reams of data for its own sake can be overwhelming, even counterproductive, and companies should have a firm grasp of how to apply that information strategically. 

Sanctions forecasting provides value to businesses in a range of interrelated ways:

• Provides a Key Factor for Evaluating Supplier Risk‍

Responsible manufacturers and other businesses considering establishing long-term relationships with manufacturers and other suppliers in their industry will carry out due diligence measures to analyze supplier risk. This might include evaluating the potential supplier’s financial fundamentals; geographical location and geopolitical stability; ESG performance; and cybersecurity infrastructure. 

Sanctions forecasting offers companies another valuable criterion to add to this composite picture of a prospective supplier’s risk profile. Even if they aren’t the target of any current sanctions, firms found to have a high likelihood of being sanctioned sometime in the future are bringing significant risk to the table for their clients—and Sanctions Forecasting allows them to incorporate that threat factor into their decision-making process. 

• Identifies Manufacturers that Need Alternative Suppliers

In some instances, it may not make sense for a business to cut off ties with a supplier outright because Sanctions Forecasting deemed them to be at high risk for future trade restrictions. But having that information does give manufacturers and other businesses the opportunity to set up contingency measures should the circumstances arise when the supplier lands on a U.S. sanctions list. More specifically, businesses can use the tool to identify where along their supply chain they should be developing alternative sourcing because of a high probability of sanctions. 

• Signals to Companies When Contractual Provisions May Be Necessary

Some supplier contracts are structured in such a way that terminating the business relationship can come with significant financial consequences—even if the reasoning for doing so is sound and justified. Manufacturers and other businesses that can see which of their manufacturers are at the greatest risk of getting sanctioned know which contracts they should be paying special attention to. Informed by the assessments provided by Sanctions Forecasting, these businesses can push to implement termination for cause into contracts with risky suppliers. In doing so, they’re providing themselves with a clear contractual out if the supplier gets targeted by the U.S. government—one that doesn’t trigger major financial penalties. 

Leverage Z2Data’s Sanctions Forecasting Solution for Your Business 

Staying ahead of ever-changing sanctions is crucial for managing supply chain risks. Z2Data’s Sanctions Watchlist helps you anticipate which manufacturers and businesses are at risk of being sanctioned globally. It does this by tracking 28 different lists across 16 different countries, including the U.S., Canada, France, Japan, China, the United Kingdom, and more.

What sets Sanctions Watchlist apart from other market solutions is its ability to go beyond simple risk lists. By integrating these predictions with your specific BOM data, the tool provides a tailored view of how potential sanctions could directly impact your suppliers and your business. This personalized view saves you time assessing potential impacts, allowing you to focus on decisions and actions to safeguard your supply chain.

By integrating these predictions with your specific BOM data, the tool provides a tailored view of how potential sanctions could directly impact your suppliers and your business.

Drawing on trusted sources such as congressional reports, NGO investigations, and journalistic insights, Z2Data’s Sanctions Watchlist tracks tens of thousands of manufacturers and suppliers at risk. This tool empowers companies to choose safer suppliers, strengthen supply chain risk management, and remain agile in a landscape increasingly affected by financial sanctions.

To learn more about how Z2Data can help you build a more resilient supply chain, schedule a free demo.