Thank you! The businesss board can apply a materiality test to pinpoint what it should dedicate time to discussing. Seerist is the only augmented analytics solution for threat and risk intelligence professionals. Sorry, something went wrong. /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. Reporting focuses on both incident analysis and trend monitoring, providing forward looking assessments to facilitate proactive risk management decision making and asset . 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. 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. CFOs' assessments of the economy in Q3. 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. [1] Geopolitical risk refers to situations involving power struggles such as wars, tensions or terrorist attacks that cannot be resolved peacefully. 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. Theyre the equity investors that reap rich returns by snapping up stakes in undervaluedbut soundassets in the challenging emerging markets that others shun. Tailored, high-impact executive workshops, Speaking engagements and macro strategy conversations. 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. Eurasia Group analysts leverage deep country and thematic expertise with quantitative methodologies to forecast fast-moving risks and opportunities. Stay connected with us and get all latest updates. Part of managing geopolitical risk is considering the ramifications of a companys core narrative. accounting technology, guidance, and expertise, Let us help you solve 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. 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. Boston Consulting Group 2023. A counterparty who defaults on a contract, or whose business . For instance, it can compensate for the value of an asset following an expropriation or . Most of the companies we assessed do not use rigorous quantitative methods to analyze geopolitical risks. 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. 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. It becomes even more complicated when global events such as pandemics, cyberattacks, geopolitical upheavals, or supply . Theyre the industrial goods companies that shift production from one country to another because they correctly predict that rising protectionist sentiment in some key markets will lead to trade actions that will alter the economics of manufacturing. Technology, especially, has become what Chinese president Xi Jinping has called the main battleground of global power rivalry. Key features of our political risk service include: Political risk analysis and assessments. We offer our . According to the World Economic Forum in its 2023 Global . Holistic-risk evaluators have the most highly developed geopolitical risk management operations. 5 And they may have to grapple with a global workforce with divergent views on issues such as data privacy and human rights. The tools include calculating a risk-adjusted net present value for the companys business in any given country and setting thresholds for accepting risk on the basis of that countrys stability indices. The most successful opportunists carefully monitor any situation that may, at first glance, appear to be a threat. Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company, New York, NY: Currency, 1996. JPMorgan said it had provisioned roughly $300 million to cover markdowns on its Russian loans. Any copying or distribution of Eurasia Group materials is prohibited. 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. 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. We call these archetypes holistic-risk evaluators, risk entrepreneurs, systemic-risk managers, and nascent-risk managers. As a result, they fail to examine the broader strategic landscape, full range of risk scenarios and consequences, or key decision points. 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. 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. Coco Feng, Chinese president Xi Jinping seeks to rally countrys scientists for unprecedented contest,. Note: Political risk consulting firms specializing in analyzing the business risk presented by the political environment in a region or country--including but not limited to regulatory risk in particular sectors, risks of appropriation or nationalization, and broader geopolitical risks. 11 Jan 2023 CEO agenda Six ways asset managers can prepare for an uncertain future 2 Feb 2023 Wealth and asset management & account inquiries, For CA: Do not sell my personal information. In volatile times such as these, a companys instinct is to focus on defenseto protect the business from harm. 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. I would like to see us preserve the benefits of deep economic integration with China, not going to a bipolar world, but clearly thats a danger that we need to address.. 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. Successful geopolitical risk managers tend to hire a cadre of personnel with experience in doing business in the market and dealing with local agencies. MAX's Geopolitical Intelligence Services knows your part of the world because we're part of it too. Discussions can focus on three risk areas: brand and reputation; operational issues, such as cybersecurity strategy; and products, services, and partnerships. 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. A major global technology company offers another good illustration. Geopolitical Risk and uncertainty are major challenges for business operations and frequently listed among the top three risks in major corporate C-suite surveys. Whats more, the COVID-19 pandemic has brought geopolitical risk factors into sharp relief. 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. Leverage unparalleled 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. The other stream is to work for such client companies directly, in an "in-house" role - i.e. We grouped companies into four general archetypes according to the extent to which they recognize and act on opportunities arising from geopolitical shiftsin addition to mitigating the downside risksand the intensity of focus and sophistication of processes with their organizations. Exploring government strategy. 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. Comprehensive spectrum of risk-based screening and due diligence solutions. 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 Kroll OnTrack Inc. or their affiliated businesses. Expropriation Not many bankers want to grapple with that shift because it is inconvenient and depressing.. Australia. 4. Learn More link icon. Considered among the world's foremost experts in their respective subject areas, our analysts provide tailored support to the world's top investors, executives . 1 @ Thomson Reuters, Sales Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. Taking a bionic approach to digital transformation can lead to successful business outcomes. However, it added, only a subset of chief risk officers (CROs) recognize this.. | Eurasia Group is the world's leading global political risk research and consulting firm. Part of managing geopolitical risk is considering the ramifications of a companys core narrative. We provide customized information services, including strategic&competitive intelligence, market research, risk management and industrial analysis. The Position . 4 Our geopolitical risk intelligence solutions provide end-to-end coverage of political, violent, sovereign, banking and investment risk worldwide. Not engaging in such discussions in the current geopolitical context would be malpractice. 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. Geopolitics is personal. 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. Shipping will increasingly be drawn into geopolitical disputes," says Kinsey. Stress in global financial markets is significant. We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. Geopolitical Intelligence Group (GIG) is a leading provider of intelligence services, offering strategic and operational insights into the complex geopolitical environment that affects businesses. Geopolitics, corporate governance and ESG. The client was exploring the feasibility of moving people and equipment to several Turkish ports and was concerned about the impact of political volatility, crime and corruption on their 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. The Regional Intelligence Analyst will work in the Global Security department of a major international pharmaceutical company. Designed for pro-active corporate security teams with granular forecasts and location specific risk analysis for 211 geographies. Read more. 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. Start with the board Many company boards already deliberate geopolitical risks to one degree or another. According to the report, no single locale is likely to dominate all regions or domains, and a broader range of actors will compete to advance their ideologies, goals, and interests.. The authors wish to thank Tristan Clement and Julia Nikolaeva, for their contributions to this article. 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. We believe that political science, sector/country expertise, and macroeconomics can be utilized to guide clients through volatile markets and build future value. Our privacy policy describes how your data will be processed. Companies should also be vigilant about risks presented by suppliers. 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. And differences can dissolve into disagreements about risk and Rasmussen Global offers political risk assessments for actors who operate in environments affected by geopolitical trends. Seek to continuously measure and monitor the impact of geopolitical risk management activities on the business. 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