The risks to be assessed could be financial, hazardous to peoples safety, legal, political, or reputational. How to factor geopolitical risk into technology strategy | EY - US Trending US pandemic response and relief funding - proactively mitigating fraud, waste and abuse 2 Feb 2023 The COO Imperative: How human emotions can unlock supply chain success 23 Jan 2023 Consulting 2023 Global economic outlook: Transforming uncertainty into opportunity Transparent econometric modeling and scenarios with inputs ranging from economic policy to political upheaval to industry turmoil. Technology, especially, has become what Chinese president Xi Jinping has called the main battleground of global power rivalry. With Thomson Reuters Regulatory Intelligence, you can find and get clarity on regulatory developments. While no one can predict the future . Financial risks have probably never been more acute. your toughest business challenges, Government professionals We provide foresight to proactively identify, manage, and mitigate risks and seize opportunities. Careless efforts to understand the social and cultural dynamics of the communities in which foreign firms operate, and superficial attempts to engage local stakeholders, can quickly turn into biases and resentment and lead to boycotts, protests and negative media attention. Our . Not engaging in such discussions in the current geopolitical context would be malpractice. One consumer packaged goods company we studied has developed a strong knowledge-sharing culture among functional networks. Goldman Sachs, meanwhile, which in February disclosed that its Russian exposure was $650 million, said it had suffered a net loss of about $300 million on investments in Russia and Ukraine. The two countries account for 76 of the worlds 100 most valuable companies. Convert risk into opportunity with bespoke solutions. & account inquiries, For CA: Do not sell my personal information. Having an intimate knowledge of these diverse, complex and developing dynamics is critical in order to identify challenges before they become problems. Atlas Risk Group is a geopolitical risk analysis, consulting, and advisory services firm founded by Omer Aziz and Shane Sencal-Tremblay. 4 (2019). 08 March 2022. This research seeks to understand the sources and consequences of geopolitical risks. All qualified applicants will receive consideration for employment without regard to race, color, age, religion, sex, sexual orientation, gender identity / expression, national origin, protected veteran status, or any other characteristic protected under federal, state or local law, where applicable, and those with criminal histories will be considered in a manner consistent with applicable state and local laws.Pursuant to Transparency in Coverage final rules (85 FR 72158) set forth in the United States by The Departments of the Treasury, Labor, and Health and Human Services click here to access required Machine Readable Files or here to access the Federal No Surprises Bill Act Disclosure. 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. We offer our . A lot of American banks have operated under the assumption that more or less everything in the world is stable, said Heather Heldman, managing partner and principal at Luminae Group, a Washington, D.C.-based geopolitical risk consulting firm. 1. Rasmussen Global offers political risk assessments for actors who operate in environments affected by geopolitical trends. Casper Wuite, 55 East 52nd Street 17 Fl 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. Stratfor Worldview is the world's leading geopolitical intelligence platform. Governments can confiscate assets, nationalize property, breach contracts, impose embargos or prohibit trade with specific countries. Any discussion of such potentially existential issues must start at the top. The Chertoff Group leverages this broad and deep expertise . Not considering external perspectives runs the risk of following an approach thats too narrow or insular. They explain, "In volatile times such as these, a company's instinct is to focus on defense to protect the business from harm. We help companies anticipate and quantify critical external strategic business risks that might adversely impact their investments, personnel, interests, and assets anywhere in the world. As geopolitical events can influence market conditions in industrialized countries just as much as they can impact developing countries, assessing and understanding them through the conduct of an effective geopolitical risk assessment will help mitigate risk exposure. ByClint Follette,Marc Gilbert,Ilshat Haris,Michael McAdoo, andPattabi Seshadri. 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. Sign up to receive periodic news, reports, and invitations from Kroll. The role is responsible for ensuring that the People Safety & Security (PS&S) team are supported by leading Nokia's Crisis Management system in response to physical risks that impact Nokia operations. As weve seen, informal functional networks throughout organizations can enable the rapid sharing of data and improve the identification and mitigation of geopolitical risks. Sign in to the product or service center of your choice. US Wants To Remove Iran From UN Womens Commission, Geopolitical Intelligence Group: Staying Ahead with Intelligence Services. Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company, New York, NY: Currency, 1996. Such a consensus can create a set of guiding principlesand, as importantly, a set of trust-based relationships and mutual understanding across the organizationthat enables rapid, purposeful reaction grounded in a shared set of priorities when risk scenarios play out. Providing a regular forum for a board to examine pressure points and operating realities from multiple perspectives and air diverging views doesnt just improve decision making and establish an organizations appetite for riskit helps create consensus across leadership on the issues of the day. Our methodology allows us to assess differences in operating models and the degree of process maturity relative to industry practices as well as to identify opportunities for improvement. Australia. Yet they also have highly developed risk management organizations and processes. 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. Industries that are positively exposed to geopolitical risks suffer a decline in investment that is larger than the aggregate effect. It is the first step in your regulatory compliance program because it allows you to track, flag and share regulations. firms, Access global tax, legal, For that reason, a company may need to issue guidance on a range of other topics, such as the appropriate way to discuss geopolitically sensitive topics in publications or speeches and how to depict contested borders on maps. Indeed, in its most recent geopolitical risk dashboard, the BlackRock Investment Institute put a technological decoupling between China and the United States as the third highest risk, with a widening of the conflict in Ukraine between NATO and Russia and major cyber-attacks causing significant damage to infrastructure and financial markets seen as the top two risks. 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. Operations in countries with poor human rights records can cause supply chain disruptions but can also lead to reputational damage and give rise to class action lawsuits, public boycotts or stockholder divestment campaigns. A counterparty who defaults on a contract, or whose business . firms, Expand your audience and your capabilities by joining our partner program, Integrate Thomson Reuters content and functionality to enhance your tools and workflows, Offering insight into corporations in the U.S. and abroad, Insights on issues concerning environmental, social, and governance topics, A look into the inner workings of government and the courts, Legal coverage focusing on the business and practice of law, Featuring an expanded insight into the world of tax professionals, Technology and innovation resource center, Exploring how technology and innovation will influence the evolution of future services, About Thomson Our operational and strategic advisory services inform our clients with valuable . Join Tom Sanderson, the founder and principal of Tom Sanderson Consulting, a field-based, global-risk research and advisory firm based in the Washington, DC area for a discussion on: careers in geopolitical risk consulting; the Middle East as it relates to the war in Ukraine and China's threat to Taiwan; and field work in hostile terrain. American Express. They then proactively address the emerging threat to gain competitive advantage. Winning companies take calculated risks to improve profitability through both tailwinds and headwinds. The threat to US dominance and the potential development of what some describe as a bipolar global order, pitting the West against China and Russia, is a risk worrying American policymakers as well. 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. Yet, companies find Geopolitical Risk difficult to fully understand and even more challenging to manage. Geopolitical risk, however, is unlike credit, liquidity, or counterparty default risk. Boston Consulting Group 2023. Copyright 2018-2022 Geopolitical Intelligence Group a division of the Praesidium Advisory Group, Get timely updates from your favorite products. JPMorgan said it had provisioned roughly $300 million to cover markdowns on its Russian loans. Subscribed to {PRACTICE_NAME} email alerts. 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. Coco Feng, Chinese president Xi Jinping seeks to rally countrys scientists for unprecedented contest,. Related Expertise: To gain a deeper understanding of the geopolitical risk management practices of global companies, we conducted structured interviews with current and former senior executives of large organizations, with various headquarters locations, in ten diverse industries. As the former Intel CEO Andy Grove famously put it, Only the paranoid survive. No matter their starting point, BCG can help. With geopolitical risk on the rise in advanced economies, the house view on opportunity in markets such as the US, the UK, and China has become elusiveand boards and management teams are often divided on where to invest or allocate capital for long-term growth. A major global technology company offers another good illustration. The Company: International Consulting Company is a global consulting firm based in Hong Kong. Case Study 2 The negative effects of climate change and progressively severe and frequent extreme weather events are becoming harder to ignore. We are constantly searching for overlooked assets where we can navigate the risk, while others are unwilling or unable to, an executive of a private-equity firm with a decades-long record of success in emerging markets told us. Global geopolitical risk and economic uncertainty have increased dramatically over the past decade, according to leading indices. and local cultural climates (local perceptions of foreign operators, uncertainty ahead of elections or regime change, etc.). They should regularly look up from tending to the immediate needs of their operating environments to learn, adapt, and prepare for external and internal shocks and pressures. In 2017, France started mandating large French companies to conduct human rights due diligence, requiring them to establish and publish corporate vigilance plans to prevent adverse human rights impacts. 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. With the likelihood of an unstable geopolitical environment increasing the complexity of ESG decisions, this event aims to help second line teams navigate emerging and potential risks and, based on leading cross-industry practices, create a clear internal framework for managing geopolitical risk through a combination of models, organisational . Our policy and political risk consulting team helps business leaders to anticipate, analyze and navigate the challenges arising from political developments. Kroll is not affiliated with Kroll Bond Rating Agency, 2 Putting politics first since 1998. 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. Instead, they depend on personnel from government relations, strategy, and other business functions to identify and mitigate risks, with one function coordinating and consolidating input. Please try again later! Business strategy and operational efficiency require constant evaluation in a complex and often volatile environment. Such a test would include a time frame for execution and possible technical options. We'll email you when new articles are published on this topic. strategy. The businesss board can apply a materiality test to pinpoint what it should dedicate time to discussing. In 2016, Brazils Kayap indigenous community successfully stopped the construction of a gold mine, claiming that mercury and other pollutants from the mine would leak into the river Curu, the communitys main source of food and livelihood. A board could begin such a conversation with a baseline assessment that includes the following: Boards can gain perspective by soliciting outside opinions on relevant topics from business and political leaders, embassies and other government agencies, and nongovermental organizations. Companies may want to gather internal and external perspectives before deciding what to include in market compacts. Violence and Civil Unrest Some may, for commercial and strategic reasons, choose to strengthen ties to the countries where the companies are based. Leaders can cultivate cohesiveness by bringing key stakeholders to the table to share views on a given engagement or project. Meanwhile continuing shortages of raw materials (39%), logistics and warehousing (35%) and components (33%) are all . Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. Eurasia Group's advisory and consulting business is built upon a research platform of leading political risk analysts and management consultants with deep country and sector expertise. Russia's invasion of Ukraine has . Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. There are no reliable historical streams of data that one can easily plug into a model. Geopolitics is "the study of the effects of Earth's geography (human and physical) on politics and international relations.". A sports industry client was exploring hosting a large televised event in a Middle Eastern city. They view disruption strategically, as a source of opportunity; embed risk management practices across the organization; and use advanced geopolitical-risk-monitoring tools and processes. "Geopolitical risks affecting banks or banks' customers have expanded significantly in recent years," according to a global survey report issued late last year from consulting firm EY. This website uses cookies. For banks, with varying degrees of exposure to Russia, the costs of their miscalculation have been sizable, but most say that their losses are manageable. Whether the billions of dollars in losses linked to Russias invasion of Ukraine and subsequent Western sanctions have prompted big banks to increase their geopolitical expertise remains unclear. Stay connected with us and get all latest updates. Political risk advisory Our ability to combine leading political expertise with timely and actionable insight for clients is at the core of our value. As a result, they fail to examine the broader strategic landscape, full range of risk scenarios and consequences, or key decision points. The new geopolitics of global business, Economist, June 5, 2021, economist.com. 11 Jan 2023 CEO agenda Six ways asset managers can prepare for an uncertain future 2 Feb 2023 Wealth and asset management International Trade, Our intelligence analysts are building on 20 years experience in understanding political risks faced by our clients in insurance and financial services. Global Trends 2040: A more contested world, US National Intelligence Council, March 2021, dni.gov. Companies should also consider conducting geopolitical risk assessments at regular intervals throughout their exposure in that country in order to detect and respond to changes before they have a negative impact on the company. In a global business environment characterized both by hypercompetition and intensifying geopolitical headwinds, it is no longer enough for companies with global footprints to only react defensively. Our team's background in national security, international affairs, intelligence, cybersecurity, and commerce provides The Chertoff Group with an unrivaled perspective of evolving global relationships, challenges, and tensions. Enter your username or email to reset your password. Geopolitics, corporate governance and ESG. Yet few companies consistently act on it. The 16th edition of the Global Risks Report, published by the World Economic Forum with support from Marsh McLennan, highlights the disruptive implications of major risks, including the COVID-19 pandemic, that may reshape our world in 2021 and over the next decade. Shipping will increasingly be drawn into geopolitical disputes," says Kinsey. Thats one finding from the US National Intelligence Councils report Global Trends 2040: A more contested world. Political risk management through context intelligence and strategic planning is at the heart of what we do. Speaking to the Atlantic Council recently, US Treasury Secretary Janet Yellen warned that it is imperative for the United States to work with China to avoid a bipolar monetary order emerging from the war in Ukraine and ongoing geo-political conflicts. Depending on the circumstance, a companys leaders may have to weigh the effect that political or media scrutiny on the companys operations in one area has on its holdings in other locales. Companies are walking a geopolitical tightrope. 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. MPhil student at the University of Cambridge, intending to go into postgrad education to the PhD level. Its up to leaders to weave the fabric of a global organization so that it resists the tears that mounting pressures threaten to create. In such discussions, its of utmost importance to make sure that all affected geographic regions are represented.
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