Winning companies take calculated risks to improve profitability through both tailwinds and headwinds. Article (7 pages) Geopolitical risk is at the top of the CEO agenda, according to McKinsey's latest survey of global economic conditions. According to our research, the consistent winners apply a highly developed approach to geopolitical risk management that emphasizes opportunity rather than just mitigation, involves the entire organization, and leverages sophisticated and robust analytical processes. Many companies, both financial and non-financial, were caught off guard, despite Putin having telegraphed his intentions for months in advance. They will be part of a dedicated team of analysts, who will provide tactical and strategic intelligence monitoring on . Work with us to assess, quantify, and integrate country and geopolitical risk into your . for political and security risk firms that sell their services or analysis to client companies (e.g. Utilize our expert insight and data to get risk scores tailored to your specific metrics, Benchmarking, Pricing and Aggregation, and Scenario Analysis In such sessions, the high-level stakeholders can discuss the companys potential exposures and review ongoing mitigation efforts. Australia. Political risk consulting. 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. In the face of fragmentation and uncertainty, many business leaders are responding by intensifying their focus on resilience. 1. But so do some pharmaceutical, technology, and packaged goods companies. 2. Below are several examples in which Kroll was able to help clients anticipate the type, probability and impact of geopolitical volatility on its operations in key emerging markets. 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. Work with us to identify the organizations and individuals with influence and decision-making power critical to your business success, Integrity Due Diligence & Integrity Consulting Others may opt to identify as global entities because of the access it accords them to pursue business opportunities in emerging markets. Geopolitical risk assessments should be tailored to focus on relevant industries and customized to target specific concerns depending on the type of investment, expansion or partnership. Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. ), policy decisions (limits to foreign direct investment, tolerance of corrupt elites, etc.) The value of being able to anticipate, synthesize, and harness risk for potential gain has never been greater. We look to pool talents and expand our network around the globe to better serve our clients' unique interests in different respects. Any copying or distribution of Eurasia Group materials is prohibited. {"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. It could also apply the system to the entities with which it does business, separating those with which a local office can work without needing additional approval from those that need risk approval and those with which an office should never work with. firms, Access global tax, legal, "autoplaySpeed":8000 They may have to balance, given the risks, near- and long-term market priorities. strategy. The other stream is to work for such client companies directly, in an "in-house" role - i.e. American Express. 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. 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. Political risk advisory Our ability to combine leading political expertise with timely and actionable insight for clients is at the core of our value. CFO sentiment got off to a very strong start in the first quarter of 2017. The firm serves financial institutions, private equity . Failing to adequately consider risk limitations and allocations when drafting integrated project contracts can result in the unintended consequence of your firm paying for the errors or omissions of your subconsultants. 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. The ability to proactively navigate turbulence can mean the difference between prospering through a crisis or falling victim. Designed for pro-active corporate security teams with granular forecasts and location specific risk analysis for 211 geographies. Thats one finding from the US National Intelligence Councils report Global Trends 2040: A more contested world. The report draws on the survey results from nearly 700 experts and decision-makers globally who were asked about their concerns . Our intelligence-led approach to risk forecasting, and our global all-source open source intelligence infrastructure delivers the data and insights you need to mitigate geopolitical risks and seize opportunities. Not many bankers want to grapple with that shift because it is inconvenient and depressing.. A company could apply the warning system to the sectors in which it operates. Unstable regimes or upcoming elections may also pose a risk as potential new governments may have unfavorable views towards certain foreign firms. 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. Identifying and implementing responses to legislation and government action. A major global technology company offers another good illustration. Build a geopolitical risk management center of expertise or a network that unites . While no one can predict the future . Sign up to receive periodic news, reports, and invitations from Kroll. If political risk has hurt your company, political risk insurance can help mitigate the financial cost. 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. "Heightened political risk globally raises the threshold for unrest, with implications for shipping, such as the ability to secure crews and access ports safely. <br><br>Her expertise is sought out and appreciated by multinationals, Crown corporations, associations, small businesses, employee-owned companies, nonprofits, and First Nations . In a world where nationalistic sentiments are on the rise, no country dominates, and regulations and standards are fragmenting, such situations are bound to accelerate. As political frictions inside and among regions heat up, the likelihood increases that they will affect a global enterprises operations, performance, or people. Andrew Cuomo, Governor (NY) Bill & Melinda Gates Foundation. For decades, companies built their . Convert risk into opportunity with bespoke solutions. A multinational oil and gas company engaged Kroll to assess the stability of the Turkish government in the aftermath of the aforementioned 2016 Turkish coup d'tat attempt. Compacts provide strategic guidance for engaging within a country. A large organization is likely to have stakeholders with differing cultural reference points and opinions on issues such as human rights and privacy. Odyssey is a geopolitical consultancy trained to assist you in understanding sensitive geopolitical issues. Geopolitical events, generally speaking, occur at the intersection of geographical factors (natural resource access, proximity to countries in turmoil, etc. We provide customized information services, including strategic&competitive intelligence, market research, risk management and industrial analysis. Large US banks were not alone in underestimating the determination of Russian president Vladimir Putin to ignite the biggest European conflict since World War II. Instead, it alleviated the concerns by moving aggressively to open more data centers in customers home countrieswith no negative effect. Reputational risk could be amplified if any or all of these risks are not mitigated properly. Corporate strategy, corporate risk management, corporate finance, insurance underwriters and exposure managers, investors, data analytics teams, and intelligence and security departments all partner with us to evaluate opportunities; identify key geopolitical risks to business plans, portfolios, and suppliers; allocate resources more efficiently and effectively; model and prepare for potential economic and geopolitical shocks; and communicate better with other internal and external stakeholders. 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. Turn qualitative country risk information into quantitative risk analysis and scores, Country Risk Investment Model 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. 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 . 3 A sports industry client was exploring hosting a large televised event in a Middle Eastern city. Get the latest news and intelligence on global issues impacting business, politics, economics, military, security and energy. "arrows": false, Companies should also be vigilant about risks presented by suppliers. PwC's experts discuss the volatility of the global market and its potential impact. Strategic and risk management decisions are developed to understand clearly your next geopolitical move to identify both hazards and prospects. Independent data and analysis for opportunity sizing, local partner selection, government stakeholder assessment and risk assessment. Part of managing geopolitical risk is considering the ramifications of a companys core narrative. Case Study 3 Key features of our political risk service include: Political risk analysis and assessments. Eurasia Group 2023. 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. Provide cogent geopolitical risk . Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. These organizations take many forms. 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. iStrategic LLC is a Political Risk Analysis and Consulting firm specializing in the Middle East and North Africa region. 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 Our main office is located in Oslo. Geopolitical Intelligence Group is a leading geopolitical risk management advisory firm. Leaders face an uncertain landscape. In volatile times such as these, a companys instinct is to focus on defenseto protect the business from harm. . 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. Each event carries it own risks, and each risk its own consequences. Prudent geopolitical risk management also requires understanding how to deal with issues that cross borders. Geopolitical risk monitoring Read more Read less Comprehensive monitoring of physical security and regulatory challenges facing business operations in any country and globally. & account inquiries, For CA: Do not sell my personal information. As a result, the company was able to significantly expand its cloud business and gain advantage over competitors that were slower to act. 4. Idiosyncratic geopolitical riskconstructed using the transcripts of firms' earnings calls, and Geopolitical forces at work in the economy. Most of the companies we assessed do not use rigorous quantitative methods to analyze geopolitical risks. /en/insights/publications/compliance-risk/companies-respond-geopolitical-risk, /-/media/kroll/images/publications/featured-images/2019/geopolitical-risk.jpg?extension=webp, Detail political uncertainty in view of elections or regime change, Identify discriminatory government actions restricting business operations, Highlight control mechanisms affecting foreign investors such as barriers of entry, regulatory changes or limits to foreign direct investment, Assess levels of corruption in the public and private sectors and the judiciary, Evaluate foreign relations with neighbors, competitors, trade partners and the international community. 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. 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. 5 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 appetite for riskit helps create consensus across leadership on the issues. Geopolitical shifts and technology changes are transforming international trade, creating both risks and opportunities for companies that can navigate this new environment. 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. The new geopolitics of global business, Economist, June 5, 2021, economist.com. Conduct time-efficient international policy monitoring and updates. Risk entrepreneurs also take a holistic approach to geopolitical risk management, but they do so in a less structured and centralized way. Leaders can cultivate cohesiveness by bringing key stakeholders to the table to share views on a given engagement or project. Trade Wars and a Stronger Europe. Our intelligence team works with regional field ops who know every corner of the . Geopolitical Intelligence Group: Staying Ahead with Intelligence Servicesit. Please try again later! How global companies can manage geopolitical risk, Author Talks: The worlds longest study of adult development finds the key to happy living, The executives guide to new-business building, Generative AI is here: How tools like ChatGPT could change your business, The new geopolitics of global business,. The Position . 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. Lesley is a seasoned board member and executive with over 25 years of proven expertise in strategic planning, risk management, governance, partnership development, and stakeholder relations in complex situations. 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. 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