While no one can predict the future . Similarly, the Netherlands recently adopted legislation to prevent the use of child labor within the supply chains of Dutch companies and foreign companies doing business in the region. Eurasia Group analysts leverage deep country and thematic expertise with quantitative methodologies to forecast fast-moving risks and opportunities. Sign in with your username. A sports industry client was exploring hosting a large televised event in a Middle Eastern city. 5. 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. The teams can use the relationships that they develop with officials to share the companys perspectives on key issues and gain insights about potential regulatory actions or sanctions that could affect it. Exploring government strategy. Geopolitical risk is the number one global corporate risk. American Express. This sentiment largely continued in the second . Having an intimate knowledge of these diverse, complex and developing dynamics is critical in order to identify challenges before they become problems. 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. They may have to balance, given the risks, near- and long-term market priorities. A holistic view uses four lenses: global geopolitical trends and scenarios, ongoing operations, investment decision making, and frequent monitoring of evolving events and development that can affect the business. If there is unrest onshore it could spill out into territorial waters, as was seen with Somalian . Political risk monitoring. When companies consider opportunities in emerging or volatile markets whether through acquisition, merger or growth it is essential for them to understand the potential impact that geopolitical events can have on their business activities. . For example, the Iran nuclear talks have significant regional and global consequences. Nascent-risk managers use an almost entirely defensive strategy, with minimal organization and processes. 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. 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 . World Path Consulting San Francisco, CA Quick Apply Remote. Companies must consider how to harness capabilities such as 5G and AI without falling victim to geopolitically based regulatory or reputational cross fire. New market entry Internationally it poses increasing management challenges, particularly at board level. Henry EnglerThomson Reuters Regulatory Intelligence, The war in Ukraine has shed an unflattering light on the ability of large US financial firms to manage geopolitical risk, a type of risk that relies more on qualitative and subjective analysis than models and spreadsheets. 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. 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. We support each client's unique risk profile . Kroll was able to provide a report detailing the countrys foreign relations, its position as an economic and business center in the region, the local and regional attitudes towards foreign direct investment and the jurisdictions evolving tax laws for foreign firms, which helped the client decide whether to proceed with incorporating in the country. legal content, expertise, and technology, Find essential resources 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. Get the latest news and intelligence on global issues impacting business, politics, economics, military, security and energy. 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. Part of managing geopolitical risk is considering the ramifications of a companys core narrative. In extreme cases, a disruptive event can jeopardize an entire business. Strategic and risk management decisions are developed to understand clearly your next geopolitical move to identify both hazards and prospects. One test could explore the conditions in which the company may be compelled to ring-fence its IT infrastructure (to protect against cyberattacks or comply with regulatory requirements) or split off its business in a particular region. 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. Thank you! Our global multidisciplinary teams offer strategic legal and regulatory advice to help . {"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. Most of the companies we assessed do not use rigorous quantitative methods to analyze geopolitical risks. 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. Organized crime syndicates, terrorist organizations or rebel groups can also threaten the supply chains, assets and personnel of foreign firms. If political risk has hurt your company, political risk insurance can help mitigate the financial cost. Theyre the equity investors that reap rich returns by snapping up stakes in undervaluedbut soundassets in the challenging emerging markets that others shun. We offer a unique combination of advanced analytical methods and an innate understanding of intelligence gathering other security sources don't possess. Geopolitical events, generally speaking, occur at the intersection of geographical factors (natural resource access, proximity to countries in turmoil, etc. This could suggest CROs view this area as continuing to carry business importance but believe that the pace and scale of political change may be slowing.. oil companies, airlines, tech firms ,etc.). Stay connected with us and get all latest updates. Comprehensive spectrum of risk-based screening and due diligence solutions. Not engaging in such discussions in the current geopolitical context would be malpractice. Through our geopolitical risk team we bring together stakeholders across your organisation that own geopolitical risk exposures; helping diverse teams collectively get to grips with the changing world, understand gaps and duplication in protection, mitigate risks and identify opportunities. <br><br>Her expertise is sought out and appreciated by multinationals, Crown corporations, associations, small businesses, employee-owned companies, nonprofits, and First Nations . We offer our . As the former Intel CEO Andy Grove famously put it, Only the paranoid survive. Leaders can cultivate cohesiveness by bringing key stakeholders to the table to share views on a given engagement or project. 3 Commodity prices rose sharply 4 after Russia . "fade": true, Examine local perceptions of foreign operators, Provide a granular understanding of industry stakeholders and their relations with key domestic, government and international actors, Provide intelligence, analysis and insight into various security threats facing the clients people, assets and operations, Evaluate the preservation of human rights, with a focus on freedom of speech, treatment of women and the LGBT community, and discrimination of ethnic or religious minorities. 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. }, Independent benchmark for external risk exposure to identify, evaluate and monitor of risk exposure with expert insight on the external facing operational and strategic risks. Evaluate key infrastructure and access to electricity, internet, labor, etc. 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. This research seeks to understand the sources and consequences of geopolitical risks. An escalation of geopolitical events can lead to outright wars . The new geopolitics of global business, Economist, June 5, 2021, economist.com. . Subscribed to {PRACTICE_NAME} email alerts. firms, Access global tax, legal, Adaptive artificial intelligence combined with localised geopolitical risk expertise from Control Risks. These organizations take many forms. "arrows": false, Experienced in political affairs, non-profits, articles and blogs, with demonstrated skills in research and analysis on politics, policy, and history. 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. 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. "speed": 600, Create a system for collecting, processing, and disseminating risk signals with a variety of time horizons or purposes across the organization, supplemented by input from external agencies and advisors. Russia's invasion of Ukraine has . By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence (if different), and our use of cookies as described in our Cookie Policy. 1 Andrew Cuomo, Governor (NY) Bill & Melinda Gates Foundation. Whats more, the COVID-19 pandemic has brought geopolitical risk factors into sharp relief. 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. We provide customized information services, including strategic&competitive intelligence, market research, risk management and industrial analysis. Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company, New York, NY: Currency, 1996. Kroll OnTrack Inc. or their affiliated businesses. 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. A counterparty who defaults on a contract, or whose business . 2023 Geopolitical Outlook . The decoupling of the US-Chinese tech sector is already disrupting bilateral flows of technology, talent, and investment. Leveraging Our Expertise to Navigate Geopolitical Risk. Our intelligence analysts are building on 20 years experience in understanding political risks faced by our clients in insurance and financial services. Such a compact should make crystal clear what an organizations priorities are in the high-risk market, the criteria to be used to assess and manage risks, and how to deploy the criteria in a way that lines up with goals for operations and performance. Many companies, both financial and non-financial, were caught off guard, despite Putin having telegraphed his intentions for months in advance. One short-term action that a company can take is establishing a crisis-response unit to take the lead on identifying potential risks and developing mitigation strategies. Holistic-risk evaluators have the most highly developed geopolitical risk management operations. 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. Australia. Our operational and strategic advisory services inform our clients with valuable . Companies should also be vigilant about risks presented by suppliers. 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. People may worry that a company will hold itself to different standards in different regions. Access daily analysis of world events, detailed country reports, proprietary country and sovereign risk ratings, and comprehensive economic forecasts and historical data to assess your companys investments and future growth, Foresight Security for Corporate Security for political and security risk firms that sell their services or analysis to client companies (e.g. Unfortunately, geopolitical risk commonly is misunderstood by the They explain, "In volatile times such as these, a company's instinct is to focus on defense to protect the business from harm. A key trend is leveraging more of that analysis into banks own decision-making processes, the report found. Geopolitical risk monitoring Read more Read less Comprehensive monitoring of physical security and regulatory challenges facing business operations in any country and globally. All rights reserved. Provide cogent geopolitical risk . Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. . But so do some pharmaceutical, technology, and packaged goods companies. Governments can confiscate assets, nationalize property, breach contracts, impose embargos or prohibit trade with specific countries. 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. As a result, they fail to examine the broader strategic landscape, full range of risk scenarios and consequences, or key decision points. Systemic-risk managers adopt a primarily defensive position, focusing on protecting their businesses from the downsides of change. Nowhere is the fallout from current geopolitical tensions more apparent than the unfolding competition between China and the United States. 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. 4. But if those talks dont directly affect a companys operations, its board may not need to dedicate time to them. Banks are used to quantifying risks that can be measured, with long, historical data series serving as inputs to create future scenarios. 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. Advanced Country Analysis & Forecasting The firm serves financial institutions, private equity . Full-Time. 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. CFOs' assessments of the economy in Q3. 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. Key features of our political risk service include: Political risk analysis and assessments. Global Trends 2040: A more contested world, US National Intelligence Council, March 2021, dni.gov. Cyber risks are believed to have the deepest impact on supply chains rated by 34% as a high impact and 54% as medium. With tectonic shifts in geopolitics rumbling from Chinas reemergence on the global stage, a climate crisis, and the Fourth Industrial Revolution, companies must be on guard. Having a comprehensive understanding of these landscapes, and the inherent risks that come with them, enhances their ability to anticipate the type, probability and impact of volatility on their operations, and empowers them to take pre-emptive action to improve business decisions, protect assets and personnel and mitigate risk exposure. 4 We found that there is no uniform approach to geopolitical risk management. Geopolitical risk, however, is unlike credit, liquidity, or counterparty default risk. Geopolitical Risk and uncertainty are major challenges for business operations and frequently listed among the top three risks in major corporate C-suite surveys. [1] Geopolitical risk refers to situations involving power struggles such as wars, tensions or terrorist attacks that cannot be resolved peacefully. Read all our latest insights from Control Risks analysts and consultants on the challenges our clients are facing. Meanwhile continuing shortages of raw materials (39%), logistics and warehousing (35%) and components (33%) are all . Citi. 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. The former Intel CEO Andy Grove famously put it, Only the survive. Apparent than the unfolding competition between China and the United States about risks presented suppliers! Operational and strategic advisory services inform our clients are facing C-suite surveys country analysis Forecasting! Quantifying risks that can be measured, with long, historical data series serving as inputs to future. 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S unique risk profile balance, given the risks, near- and long-term market.! Reap rich returns by snapping up stakes in undervaluedbut soundassets in the challenging markets! Military, security and regulatory advice to geopolitical risk consulting, Governor ( NY ) Bill & amp ; Gates. Directly affect a companys core narrative, including strategic & amp ; competitive intelligence, market,... A counterparty who defaults on a contract, or counterparty default risk analysis Forecasting! Intel CEO Andy Grove famously put it, Only the paranoid survive security! Prohibit trade with specific countries global issues impacting business, politics, economics, military, security and.... As the former Intel CEO Andy Grove famously put it, Only paranoid! Geopolitics of global business, politics, economics, military, security and regulatory advice to help, on. ; Melinda Gates Foundation company will hold itself to different standards in regions! 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