For many companies, the strategic competition between China and the United States will top the list of standing risk issues to discuss. Enter your username or email to reset your password. Deglobalization is poised to accelerate amid knock-on effects of Russias increased isolation from the global economy, ongoing sanctions and export controls, and the accompanying emphasis on self-reliance and the diversifying supply chains.. the dynamics of geopolitical risk the complex interactions of multiple actors (both state and non-state) that develop either slowly or rapidly across international borders and markets. Political risk advisory Our ability to combine leading political expertise with timely and actionable insight for clients is at the core of our value. ), policy decisions (limits to foreign direct investment, tolerance of corrupt elites, etc.) 08 March 2022. Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. . According to the World Economic Forum in its 2023 Global . MAX's Geopolitical Intelligence Services knows your part of the world because we're part of it too. These circumstances can leave traditional risk management systems and teams flatfooted. Accurately forecast, quantify, and compare the financial viability of new investments and existing business activities by sector and project type, Bespoke Risk Scoring Stress in global financial markets is significant. PwC's experts discuss the volatility of the global market and its potential impact. BCG X disrupts the present and creates the future by building bold new tech products, services, and businesses. Whether companies are concerned about continuity in a market that is experiencing political upheaval or evaluating a significant partnership in a jurisdiction that is known for widespread corruption, conducting geopolitical risk assessments results in a deeper, more granular understanding of the threats and risk mitigation possibilities. Leaders face an uncertain landscape. All areas of the globe are covered by our seasoned team of subject matter experts, national security advisors, consultants, analysts, investigators, and in-field agents. . The value of being able to anticipate, synthesize, and harness risk for potential gain has never been greater. According to our research, therefore, the best practice is to tightly integrate geopolitical risk managementalong with the monitoring of technological, consumer, regulatory, and other trendsinto the strategic-planning process so that leaders can make informed choices and identify new opportunities. Understand how geopolitical trends impact your business We help organisations understand the complex issues defining international business, geopolitics and cross-border regulation so they can better anticipate change, identify opportunities, manage risks and ultimately shape the future of their organisation. By closely monitoring growing public support for greenhouse gas mitigation measures in many countries, for example, a leading oil-and-gas company was able to invest in renewable natural-gas technologies much earlier than its peers. Many companies, both financial and non-financial, were caught off guard, despite Putin having telegraphed his intentions for months in advance. Stratfor Worldview is the world's leading geopolitical intelligence platform. The geopolitical risk firm that helps you understand the world. Part of managing geopolitical risk is considering the ramifications of a companys core narrative. Krolls geopolitical risk report informed the client of the regulatory and business environment in the country and the particular city, the level of corruption in the private and public sectors and identified potential cultural and societal issues that may have impacted the clients human operations. In the face of fragmentation and uncertainty, many business leaders are responding by intensifying their focus on resilience. 4. Develop a pipeline of geopolitical risk management talent by rotating personnel with strong leadership potential through countries, establishing a more permanent team experienced in working with governments, and providing customized training that includes simulations of real-world cases. With Thomson Reuters Regulatory Intelligence, you can find and get clarity on regulatory developments. Whats more, the COVID-19 pandemic has brought geopolitical risk factors into sharp relief. Case Study 1 Today, the company has offices in New York, Washington, and London, as well as a network of experts and resources around the world. {"name":"login","url":"","enabled":false,"desc":", Discover more about S&P Globals offerings, Learn how we can help you manage geopolitical risk, Differentiating geopolitical risk for profitable investing, Let our risk ratings guide your decisions, M&A In Focus: Tech Acquisitions and the New Normal in 2023, Assessing the impact of the U.S. Government Accountability Office recommendations on Export Control Compliance at universities, Foresight Security for Corporate Security, Integrity Due Diligence & Integrity Consulting, Benchmarking, Pricing and Aggregation, and Scenario Analysis. To sharpen their view of the shifting global landscape, a growing number of major multinational corporations have been investing in their abilities to identify trends early and to influence the decisions of host governments ahead of major transitions, such as sudden changes in trade agreements or national governments. Managing risk in today's environment is complex. Companies may want to gather internal and external perspectives before deciding what to include in market compacts. We offer a unique combination of advanced analytical methods and an innate understanding of intelligence gathering other security sources don't possess. And a narrative that works in one place could inhibit market opportunities in another or create sensitivities among regions. To enhance the role of geopolitical risk management and thus create tangible business opportunities, leaders should take the following steps: In every risk there is also an opportunity is a well-worn adage. In such discussions, its of utmost importance to make sure that all affected geographic regions are represented. Organizations can be prepared to respond to geopolitical risks across multiple time frames. Full-Time. Thats one finding from the US National Intelligence Councils report Global Trends 2040: A more contested world. Turn qualitative country risk information into quantitative risk analysis and scores, Country Risk Investment Model Managing geopolitical risk. Geopolitical forces at work in the economy. We offer our . Independent data and analysis for opportunity sizing, local partner selection, government stakeholder assessment and risk assessment. Any discussion of such potentially existential issues must start at the top. The bank also attributed $120 million of a $524 million trading loss during the first quarter to its role as one of the counterparties in a short trade by Chinese metals group Tsingshan that went south amid the market turmoil that followed the outbreak of war. CFO sentiment got off to a very strong start in the first quarter of 2017. As the former Intel CEO Andy Grove famously put it, Only the paranoid survive. In volatile times such as these, a companys instinct is to focus on defenseto protect the business from harm. After consulting with top business leaders and legal, public-policy, and risk professionals at Fortune 500 companies in multiple industries, we suggest that company leaders can use a five-pronged approach to managing geopolitical risk. Resource shortages likely to disrupt critical supply chains in South Africa, US Weekly Economic Commentary: Stubborn inflation clouds the outlook, Weekly Pricing Pulse: Commodities down as energy crisis recedes, The global economy moves forward, averting recession, #China is set to cut its #crude throughputs in March from the recent highs in February as maintenance season starts https://t.co/A7vYRC0Y8R, Maintaining #economic stability and security of #energy supply requires investing in "today's energy system" as wel https://t.co/tasDJgCSAR, Africa energy review and outlook 2022-23: Turbulence on the road to recovery. In this context, the word investment can refer to anything from purchasing shares of a company to trying to sell . A quick message or email to the global functional marketing, finance, or risk community, the company told us, allows for rapid troubleshooting, the cross-pollination of insights, and the sharing of best practices. Kroll is not affiliated with Kroll Bond Rating Agency, Boston Consulting Group is an Equal Opportunity Employer. Most companies do not have a dedicated team of full-time employees devoted to geopolitical risk management. Nearly half of bank CROs (48%) plan to broaden methods for identifying new or emerging political risks and a quarter plan to build new tools for qualitative tracking and reporting on political risk measures.. 11 Jan 2023 CEO agenda Six ways asset managers can prepare for an uncertain future 2 Feb 2023 Wealth and asset management One energy company, for example, established a country chair position, which is typically assigned to the most senior business executive in a given country and is seen as a prestigious step toward advancement to top management. In extreme cases, a disruptive event can jeopardize an entire business. Work with us to assess, quantify, and integrate country and geopolitical risk into your . Some may, for commercial and strategic reasons, choose to strengthen ties to the countries where the companies are based. The ability to proactively navigate turbulence can mean the difference between prospering through a crisis or falling victim. The report draws on the survey results from nearly 700 experts and decision-makers globally who were asked about their concerns . Geopolitical Risk and uncertainty are major challenges for business operations and frequently listed among the top three risks in major corporate C-suite surveys. Those risks could include securing operations and people amid political instability, ensuring that they comply with evolving local regulations in one market, and staying abreast with human-rights considerations in another. Companies must consider how to harness capabilities such as 5G and AI without falling victim to geopolitically based regulatory or reputational cross fire. Comprehensive spectrum of risk-based screening and due diligence solutions. Risk entrepreneurs also take a holistic approach to geopolitical risk management, but they do so in a less structured and centralized way. As a management consultant, Dr. Smith has worked for PA Consulting Group . But if those talks dont directly affect a companys operations, its board may not need to dedicate time to them. Transparent econometric modeling and scenarios with inputs ranging from economic policy to political upheaval to industry turmoil. strategy. Global geopolitical risk and economic uncertainty have increased dramatically over the past decade, according to leading indices. The firm's new geopolitical advisory team is being launched as multinational corporations grapple with volatile events around the world, from Russia's invasion of Ukraine to simmering tensions. Its up to leaders to weave the fabric of a global organization so that it resists the tears that mounting pressures threaten to create. For example, the Iran nuclear talks have significant regional and global consequences. and local cultural climates (local perceptions of foreign operators, uncertainty ahead of elections or regime change, etc.). They explain, "In volatile times such as these, a company's instinct is to focus on defense to protect the business from harm. Trade Wars and a Stronger Europe. The Ukraine war is likely to drive geopolitical fragmentation and the emergence of blocs, in our view, BlackRock said in its report. "arrows": false, Political risk management through context intelligence and strategic planning is at the heart of what we do. Some foreign firms, who were perceived as having received favoritism from the Ethiopian government, were specifically targeted by protesters and the government had to declare multiple states of emergencies that were extremely disruptive to the business operations of those foreign firms. Stay connected with us and get all latest updates. In 2020, it will move beyond strategic tech . Instead, boards can dedicate regular standing time to analyzing how to respond to the geopolitical risks that their enterprises face as part of a broader board effort to build more resilient companies. Short of outright expropriation, governments can discriminate against foreign firms by imposing stringent regulatory requirements, limiting foreign direct investment and allowing domestic industry monopolies to form. Seerist is the only augmented analytics solution for threat and risk intelligence professionals. 2 Holding regular briefing sessions with a companys board and senior leaders on relevant geopolitical risks is a key midterm action. Amid such a complex landscape, boards and corporate leaders should evaluate the many economic and other factors that may be important to their companies' strategies, investments, and growth objectives. Independent data and analysis for opportunity sizing, local partner selection, government stakeholder assessment and risk assessment. The survey, conducted with the Institute for International Economics, was taken before the crisis in Ukraine, so now CROs may be taking a different view. What may be more worrying than the financial losses, say experts, is the mindset of those leading large US institutions and a sense of complacency regarding the risks of doing business abroad. Others may opt to identify as global entities because of the access it accords them to pursue business opportunities in emerging markets. Identifying and implementing responses to legislation and government action. Not considering external perspectives runs the risk of following an approach thats too narrow or insular. Financial risks have probably never been more acute. Build a geopolitical risk management center of expertise or a network that unites . In addition to their normal duties, country chairs are responsible for liaising with all external stakeholdersincluding national and local governments, community organizations, and other enterprises. Geopolitical risk assessments consist of identifying possible risks, assessing the likely impact of those risks and making recommendations to manage, mitigate and respond to them. Turning Geopolitical Risk into Strategic Advantage, Technology, Media, and Telecommunications, Designing Resilience into Global Supply Chains, How President-Elect Biden Will Approach Global Trade, Whats at Stake If the US and China Really Decouple, Assessing Approaches to Geopolitical Risk Management. Geopolitical events can manifest themselves in many ways. The companies with the most disciplined approach, however, often use a combination of processes and tools to look at risks during different time frames and with different rates of periodic review. 5 Theyre the technology companies and oil producers that can tell a political backlash is brewing well before it hits full force and then use their foresight to reposition their businesses ahead of competitors. To ingrain the importance of external relations throughout their organizations, some companies rotate high performers and potential candidates for upper management into country leadership positions, where risk management becomes one of their duties. But the discussions often focus on a specific investment, project, or market entry or exit. High levels of corruption among lawmakers can make securing the necessary licenses, permits and registrations an arduous process, especially whilst also staying in compliance with wide-reaching laws like the U.S. FCPA. MPhil student at the University of Cambridge, intending to go into postgrad education to the PhD level. The most successful opportunists carefully monitor any situation that may, at first glance, appear to be a threat. Winning companies take calculated risks to improve profitability through both tailwinds and headwinds. Long-term planning can also cover such issues as the following: For both internal and external stakeholders, walking a geopolitical tightrope may cause leaders to redefine how they think about and position their companies. Our geopolitical risk intelligence solutions provide end-to-end coverage of political, violent, sovereign, banking and investment risk worldwide. SVA ( www.stevevickersassociates.com) is a specialist international risk mitigation, corporate intelligence and risk consulting company. Political risk consulting firms. One Western energy company, for instance, credited the skills and transparency of its government relations staff for being able to operate simultaneously in two Middle Eastern nations despite strong political tensions between the two governments. And they may have to grapple with a global workforce with divergent views on issues such as data privacy and human rights. the most significant opportunities and challenges created by a constantly evolving geopolitical landscape and the investments or adjustments needed to address them, potential unintended consequences from taking a particular risk position, key takeaways from how peer companies responded to similar shock situations. The organization saw a troubling trend in a number of key markets that could potentially threaten its growing cloud-storage business: mounting anxiety on the part of policymakers and customers, who were worried that local governments could access confidential data kept on servers in certain countries. In . Derek Leatherdale and Hanif Barma from the Risk Coalition identify in this article the key things that any board or risk committee should consider in the context of the complex and volatile geopolitical environment in which business now operates. Geopolitics is personal. Questions to ask about key business risks arising from geopolitical and related crises Strategic, operational, financial and compliance risks are common level-one risk categories that board members and management need to consider. If companies operate in markets that are high risk because of political instability or the threat of international sanctions, they can develop market-specific assessments or compacts that fuse corporate strategy and risk management. Quantifying return on advocacy is difficult, however. Successful geopolitical risk managers tend to hire a cadre of personnel with experience in doing business in the market and dealing with local agencies. Companies also have been attempting to measure the impact of their lobbying efforts on governments, such as by benchmarking the success of their advocacy compared with that of their industry peers or estimating potential cost savings. It becomes even more complicated when global events such as pandemics, cyberattacks, geopolitical upheavals, or supply . An escalation of geopolitical events can lead to outright wars . If an energy company mismanages the environmental, political, and regulatory fallout from a disastrous oil spill, for example, it could potentially lose its license to operate in that countryboth legally and metaphorically, in terms of public acceptance. Violence and Civil Unrest The Volatility and Risk Institute has embarked on a study of geopolitical risk and its relation to financial risks. 3. Consider the trade-offs of framing how the company talks about itself, if that narrative could create conflicts with stakeholders, and what the potential remedies could be. Such external pressures exert other internal pressures on corporate leaders. In 2016 following a failed coup d'tat, the Turkish government targeted domestic companies associated with the Turkish cleric Fethullah Glen, who it claimed was behind the attempt. The output of this study has implications for portfolio construction and risk management as well as sensible business and governmental practice. International Business, March 30, 2021 Reuters, The EY survey last year on bank risk management, Monitoring for Reg BI poses bigger challenge as US regulators get serious, Weighing the various approaches to Scope 3 data strategies, 10 Global compliance concerns for 2023: ESG, money-laundering, and regulatory concerns weigh on compliance officers, From values signaling to implementation: Steps for corporate tax leaders to prepare for ESG, Thomson Reuters Institute launches Technology and Innovation Resource Center, Small law firms finding success & challenges in uncertain economy, says new report, Innovation Cultural Missteps After consulting with top business leaders and legal, public-policy, and risk professionals at Fortune 500 companies in multiple industries, we suggest that company leaders can use a five-pronged approach to managing geopolitical risk. The challenges that geopolitical risks create will get worse. Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Consider the trade-offs of framing how the company talks about itself in a specific way, if that narrative could create conflicts with external or internal stakeholders, and what the potential remedies could be. "Heightened political risk globally raises the threshold for unrest, with implications for shipping, such as the ability to secure crews and access ports safely. Geopolitical Brunswick Geopolitical brings together individuals with enormous experience and insight, and offers business leaders strategic advice at the highest level on a wide range of global issues and challenges. Our privacy policy describes how your data will be processed. accounting technology, guidance, and expertise, Let us help you solve Case Study 3 International Trade, 1 Another short-term action is to invest in strategy, PR, and government-relations teams that can serve as the companys points of contact with senior government officials and key stakeholders in multiple jurisdictions. The decoupling of the US-Chinese tech sector is already disrupting bilateral flows of technology, talent, and investment. Local partner selection, government stakeholder assessment and risk Consulting company the of! Insight for clients is at the top geopolitical risk consulting risks in major corporate surveys. Councils report global Trends 2040: a more contested world another or create sensitivities regions. First glance, appear to be a threat violent, sovereign, banking and investment will be processed refer. 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