Safeguarding government supply chains: data-driven solutions for security and resilience

For every nation, safeguarding supply chains is more than a logistical puzzle; it’s a matter of national security and prosperity. Indeed, resilient and secure supply chains are a non-negotiable, especially when used for critical national operations across defense and infrastructure to healthcare and technology. 

It stands to reason, then, that supply chains of national importance are a target for bad actors. Their vast scale, transnational connections, and the increasingly sophisticated tactics used to undermine or disrupt the flow of goods make protecting these supply chains from exploitation and building resilience not just a challenge, but an imperative. 

To tackle these challenges, governments need data-driven tools that provide visibility into complex supplier networks, uncover hidden risks, and support proactive decision-making. With this in mind, Moody’s solutions combine advanced data fusion, AI-driven analytics, and rigorously curated datasets that are filtered and reviewed by a team of analysts to deliver insights that inform investigations, illuminate supply chain vulnerabilities, and enhance due diligence. 

Government supply chains can be vast and multifaceted. Some U.S. federal departments are working with hundreds of thousands of suppliers globally, ranging from major contractors to small component manufacturers. This complexity can introduce several challenges:

1. Limited visibility: Procurement systems may struggle to track the financial health, ownership structures, and geographic origins of every supplier, particularly private companies operating in opaque jurisdictions. For instance, without effective monitoring, governments may encounter surprise supplier disruption that stems from a supplier’s deteriorating financial health.   
   
   
2. Dependence on dual-use technologies: Many suppliers produce components or technologies that have both civilian and military applications – such as critical drone components and quantum computing technologies.
   
   As such, bad actors may exploit dual-use technologies to embed vulnerabilities, such as backdoors in software or substandard hardware components, which could compromise both civilian and military systems – posing a significant threat to national security, sensitive information, and intellectual property.  
   
   
3. Fragmented data systems: Siloed procurement and intelligence datasets could fail to connect the dots across domains, leaving gaps in understanding supplier relationships, ownership control, or geopolitical risks. 
   
   
4. The rise of autonomous weapon systems: Beyond dual-use technology risks, autonomous weapon systems such as unmanned aerial systems (UAS) can be targeted by bad actors. The rise of hybrid warfare tactics, as exemplified by the Russia-Ukraine war, underscores the importance of securing critical supply chains for these military-specific technologies. Vulnerabilities in such systems could lead to compromised defense capabilities and heightened risks to national security. 

Bad actors exploit the complexity and opacity of global supply chains to conduct coercive and covert operations. These threats may include:

1. Infiltration by hidden entities: Through shell companies, proxies, and complex ownership structures, bad actors infiltrate supply chains. For example, a compromised supplier in critical sectors like aerospace or semiconductors could lead to equipment shortages, bottlenecks, or vulnerabilities that jeopardize military readiness.  
   
   
2. Sanctions evasion: Bad actors use layered corporate structures in jurisdictions with weak oversight to continue operations despite sanctions. For instance, entities may use opaque ownership to evade export controls while facilitating illicit trade. 
   
   
3. Weaponized networks: Bad actors leverage global supply chains to spread influence, conduct nefarious activity, and manipulate critical infrastructure. Hidden affiliations with sanctioned entities or foreign-controlled infrastructure can leave governments exposed to coercion or sabotage. This can include threats to communications networks, autonomous weapon systems, and other critical infrastructure that are targets in hybrid warfare, as seen in the ongoing Russia-Ukraine war. 

To protect supply chains, governments need to consider adopting rigorous measures for supply chain resilience and risk management. Key strategies could include:

1. Vendor due diligence and risk profiling: Tracing ownership structures, beneficial ownership levels, and identifying the origins of key suppliers is critical to building supply chains that are less likely to be compromised by persons with hidden influence. Such profiling is also important to uphold Defense Industrial Base (DIB) requirements that national defense materials, products, and services are sourced from manufacturers based in allied nations under FOCI regulations.
   
   Moody’s Ultimate Beneficial Ownership (UBO) data can help organizations uncover hidden control by foreign entities or sanctioned organizations. By enriching datasets with geographic, financial, and operational intelligence, governments can screen suppliers for hidden risks. For example, Moody’s analyst-curated data can help uncover connections between seemingly legitimate suppliers and foreign-controlled entities – helping government entities to identify and expose entities circumventing sanctions and prevent infiltration into sensitive contracts. 
   
   
2. Supply chain illumination: Advanced data fusion technologies, such as Moody’s Knowledge Graph (KG), can consolidate procurement, financial, and operational data to help map supply chain risks. This includes exposing shell company-related risk, hidden affiliations, and geographic concentrations of risk. These tools can be used to highlight compliance risks, such as mandates to source from allied and trusted suppliers within the DIB.  
   
   
3. Proactive monitoring of supplier’s financial health: Quantitative supplier performance risk scores, derived from Moody’s financial and industry-specific models, can help government departments to anticipate vendors at risk of instability or financial deterioration. Such insights are particularly helpful for monitoring private equity-backed suppliers, whose leveraged debt can lead to higher default risk than other suppliers. 

Government supply chains are increasingly targeted by sophisticated bad actors who exploit their depth and complexity. Safeguarding the security and resilience of these supply chains is critical for national security, mission success, and economic stability.

Moody’s solutions fuse commercial, financial, and operational data – thereby creating a living map of human and commercial behavior that can be used in classified environments. By tracing connections between suppliers, shell structures, and proxies across jurisdictions, analysts can better illuminate hidden risks and vulnerabilities. 

For more information on how Moody’s data and analytics can be used by governments to stay ahead of emerging threats, transform supply chain risk management strategies, and strengthen national security initiatives, please get in touch with the team.