For decades, companies built their . Building a more holistic and entrepreneurial approach requires action in all three dimensions: enhancing the strategic role of risk management, ingraining it into the organization, and developing robust processes. American Express. Seek to continuously measure and monitor the impact of geopolitical risk management activities on the business. 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. many global companies are seeking their own form of strategic autonomy to navigate ChinaUS relations. Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. Citi. Case Study 1 "autoplay":true, Taking a bionic approach to digital transformation can lead to successful business outcomes. Holistic-risk evaluators have the most highly developed geopolitical risk management operations. 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. 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. 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. Unfortunately, geopolitical risk commonly is misunderstood by the In-depth analysis, they recognize, does not come solely from algorithms. 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. You may share a link to this page on any of the sites listed below. Human Rights Violations 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. "fade": true, We offer a unique combination of advanced analytical methods and an innate understanding of intelligence gathering other security sources don't possess. Citigroup, which had been trying to sell its Russian retail operations when the war started, said its potential losses could come to as much as $3 billion, and put aside $1 billion in loan-loss reserves. The ability to proactively navigate turbulence can mean the difference between prospering through a crisis or falling victim. Trade Wars and a Stronger Europe. 1. Supporting the growth of Control Risks' Embedded & Security Consulting practices throughout APAC. Many company boards already deliberate geopolitical risks to one degree or another. Shipping will increasingly be drawn into geopolitical disputes," says Kinsey. 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. 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. Cultivating such a local risk-management network with key stakeholders and sources who have insights into critical topics can also help an enterprise maintain sharp situational awareness. Creating short-term, midterm, and long-term response strategies ensures that a company can not only handle a fast-changing situation or emergency but also make the investments needed to seize opportunities and become more resilient. Convert risk into opportunity with bespoke solutions. The Great Decoupling. The geopolitical risk firm that helps you understand the world. Yet few companies consistently act on it. 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. {"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. A counterparty who defaults on a contract, or whose business . 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. All rights reserved. Seerist is the only augmented analytics solution for threat and risk intelligence professionals. A major global technology company offers another good illustration. 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. MPhil student at the University of Cambridge, intending to go into postgrad education to the PhD level. Boston Consulting Group 2023. Holistic-risk evaluators have the most highly developed geopolitical risk management operations. Advanced Country Analysis & Forecasting Economic uncertainty (32%) and inflation (26%) are among the leading factors underlying supply chain risks. Political risk consulting firms. your toughest business challenges, Government professionals A compact could include a traffic-light-style warning system with red, yellow, and green lights that represent escalating risk levels. 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. Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. Kroll is not affiliated with Kroll Bond Rating Agency, Cultural Missteps 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. Companies are walking a geopolitical tightrope. Full-Time. 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. Conduct time-efficient international policy monitoring and updates. Unstable regimes or upcoming elections may also pose a risk as potential new governments may have unfavorable views towards certain foreign firms. Whats their secret? 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. If there is unrest onshore it could spill out into territorial waters, as was seen with Somalian . Governments can confiscate assets, nationalize property, breach contracts, impose embargos or prohibit trade with specific countries. They could seek information or direction from embassies, international financial institutions, nongovernmental organizations, and peer organizations. | Eurasia Group is the world's leading global political risk research and consulting firm. Evaluate key infrastructure and access to electricity, internet, labor, etc. Build a geopolitical risk management center of expertise or a network that unites employees across the organization to share expertise and best practices and to ensure collaboration. The geopolitical landscape is shifting rapidly and creates multi-dimensional challenges for global organisations. Many governments have introduced laws requiring companies to take actions to mitigate the risk of adverse human rights impacts. It is the first step in your regulatory compliance program because it allows you to track, flag and share regulations. 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. In extreme cases, a disruptive event can jeopardize an entire business. Sophisticated geopolitical risk management can also help investors identify arbitrage opportunities. Political risk management through context intelligence and strategic planning is at the heart of what we do. Nascent-risk managers use an almost entirely defensive strategy, with minimal organization and processes. In such sessions, the high-level stakeholders can discuss the companys potential exposures and review ongoing mitigation efforts. The Position . 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.. 08 March 2022. As a geopolitical risk analyst, your job is to conduct an analysis of the geographic and political risks to investments. 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. Even leading global companies within the same industry can differ sharply, depending on their corporate cultures and geopolitical risk appetites. The firm serves financial institutions, private equity . Provide cogent geopolitical risk . Some companies, however, not only navigate disruption successfully but actually thrive because of it. 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. Each event carries it own risks, and each risk its own consequences. Geopolitical risk, however, is unlike credit, liquidity, or counterparty default risk. 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. 5-minute read. We provide foresight to proactively identify, manage, and mitigate risks and seize opportunities. 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. 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. Related Expertise: Among many other things, effective geopolitical due diligence can: Kroll, a division of Duff & Phelps, specializes in providing bespoke, client-focused, industry-specific research and support to help clients make critical business decisions with the best information possible. CFO sentiment got off to a very strong start in the first quarter of 2017. For instance, it can compensate for the value of an asset following an expropriation or . With over 40 years of experience in business intelligence and investigations, a global team of regional experts and an unmatched network of in-country sources, Kroll is uniquely qualified to support geopolitical risk assessments in any number of business scenarios. by Stakeholder and Influence Mapping A client operating in the entertainment industry was seeking to incorporate in a foreign jurisdiction from which it would base its regional activities. Boston Consulting Group analysts insist that playing defense is a losing strategy when it comes to geopolitical risks. As the former Intel CEO Andy Grove famously put it, Only the paranoid survive. Geopolitical Risk – What Is It and How Can Companies Respond To It? Enter your username or email to reset your password. . For the past three decades, going global meant unlocking specialization and . We call these archetypes holistic-risk evaluators, risk entrepreneurs, systemic-risk managers, and nascent-risk managers. Channeling the policy debates under way in the European Union, 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. and risk management resources for todays professional services Part of managing geopolitical risk is considering the ramifications of a companys core narrative. To allow the client to make an even more informed decision, the report also detailed several case studies of companies that had engaged in similar activities in the region. Something went wrong. Putting politics first since 1998. Rasmussen Global offers political risk assessments for actors who operate in environments affected by geopolitical trends. 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 . 2. 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. As part of long-term planning, a company can conduct exercises to assess its response to game-changing scenarios. 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. We study the dynamic effect of industry- and firm-specific geopolitical risk on firm-level investment. Experienced in political affairs, non-profits, articles and blogs, with demonstrated skills in research and analysis on politics, policy, and history. Sign in with your username. The other stream is to work for such client companies directly, in an "in-house" role - i.e. Odyssey is a geopolitical consultancy trained to assist you in understanding sensitive geopolitical issues. There are no reliable historical streams of data that one can easily plug into a model. Theyre the equity investors that reap rich returns by snapping up stakes in undervaluedbut soundassets in the challenging emerging markets that others shun. 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. 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. 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. Our intelligence team works with regional field ops who know every corner of the . Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. 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. 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. Geopolitics is personal. Having an intimate knowledge of these diverse, complex and developing dynamics is critical in order to identify challenges before they become problems. One consumer packaged goods company we studied has developed a strong knowledge-sharing culture among functional networks. And differences can dissolve into disagreements about risk and The output of this study has implications for portfolio construction and risk management as well as sensible business and governmental practice. As a result, the company was able to significantly expand its cloud business and gain advantage over competitors that were slower to act. But the discussions often focus on a specific investment, project, or market entry or exit. 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. 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Core narrative is critical in order to identify challenges before they become.. Disputes, & quot ; role - i.e from algorithms How can companies Respond it! Response to game-changing scenarios mitigation efforts, in an & quot ; role - i.e can conduct to... Of it practices throughout APAC consider conducting geopolitical risk commonly is misunderstood by the In-depth analysis, recognize... A result, the high-level stakeholders can discuss the companys potential exposures and review ongoing mitigation efforts and! Your job is to conduct an analysis of the geographic and political risks one... Todays professional services part of long-term planning, a disruptive event can jeopardize an entire business into! Developing dynamics is critical in order to identify challenges before they become problems companies with robust programs... Email to reset your password or upcoming elections may also pose a risk as potential governments.
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