We found that there is no uniform approach to geopolitical risk management. Casper Wuite, 55 East 52nd Street 17 Fl FS firms need to be agile and resilient to thrive. A strong cross-functional interface is critical, especially for companies that take a holistic approach to risk assessment. 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. the most significant opportunities and challenges created by a constantly evolving geopolitical landscape and the investments or adjustments needed to address them, potential unintended consequences from taking a particular risk position, key takeaways from how peer companies responded to similar shock situations. All rights reserved. The firm's new geopolitical advisory team is being launched as multinational corporations grapple with volatile events around the world, from Russia's invasion of Ukraine to simmering tensions. 5 These organizations take many forms. Conduct time-efficient international policy monitoring and updates. 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. Convert risk into opportunity with bespoke solutions. Taking a bionic approach to digital transformation can lead to successful business outcomes. Exploring government strategy. International Business, March 30, 2021 Successful geopolitical risk managers tend to hire a cadre of personnel with experience in doing business in the market and dealing with local agencies. The company could have focused mainly on trying to prove that there was no reason for concern. "arrows": false, Identifying and implementing responses to legislation and government action. Political risk analysis In an era of major geopolitical shifts, where liberal and democratic norms are constantly challenged, companies are increasingly required to factor political risks into their considerations. Independent data and analysis for opportunity sizing, local partner selection, government stakeholder assessment and risk assessment. No matter their starting point, BCG can help. In 2017, violence erupted in parts of Ethiopia as certain ethnic groups demonstrated against government discrimination. 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. Minimize risk, optimize strategy, and seize opportunity with Luminae Group Subscribe to our mailing list to receive expert geopolitical intelligence, unparalleled insight, and an insider perspective on global affairs. Responsibilities: Provide cogent geopolitical risk analysis to a diverse array of clients and various internal teams in written or recorded deliverables. MPhil student at the University of Cambridge, intending to go into postgrad education to the PhD level. This combination of short-term and long-term monitoring allows for timely action. 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. Ian Bremmer is the president and founder of Eurasia Group, the leading global political risk research and consulting firm started in 1998. 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. Nonetheless, the results highlighted the need for banks to embed political analysis into risk-based decision-making. Global Trends 2040: A more contested world, US National Intelligence Council, March 2021, dni.gov. 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. (See Exhibit 2.). We look to pool talents and expand our network around the globe to better serve our clients' unique interests in different respects. by Comprehensive spectrum of risk-based screening and due diligence solutions. Country risk mapping. Geopolitical risk is the number one global corporate risk. Article (7 pages) Geopolitical risk is at the top of the CEO agenda, according to McKinsey's latest survey of global economic conditions. Key features of our political risk service include: Political risk analysis and assessments. 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. Geopolitics is "the study of the effects of Earth's geography (human and physical) on politics and international relations.". The most successful opportunists carefully monitor any situation that may, at first glance, appear to be a threat. 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. 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. Full-Time. Not considering external perspectives runs the risk of following an approach thats too narrow or insular. 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. 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. The challenges that geopolitical risks create will get worse. As weve seen, informal functional networks throughout organizations can enable the rapid sharing of data and improve the identification and mitigation of geopolitical risks. trust us to help them make informed decisions, Professional services To enhance the role of geopolitical risk management and thus create tangible business opportunities, leaders should take the following steps: In every risk there is also an opportunity is a well-worn adage. JPMorgan said it had provisioned roughly $300 million to cover markdowns on its Russian loans. 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 the face of fragmentation and uncertainty, many business leaders are responding by intensifying their focus on resilience. Strategic and risk management decisions are developed to understand clearly your next geopolitical move to identify both hazards and prospects. 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. While there is no universal formula for success, building robust geopolitical risk management organizations and processes is key to begin navigating an uncertain world. Compacts provide strategic guidance for engaging within a country. Any investment in taxable fixed-income securities is subject to certain risks, including credit risk, interest-rate risk, foreign risk, and currency risk. Intelligence-led solutions for underwriters and insurance exposure management teams to efficiently identify, evaluate and monitor risks and opportunities at country, region and location specific levels, A credible, independent view of external operational and strategic risks and the tools to integrate those risks into your financial evaluation, Improve the quality of investment decision-making with pressure-tested macroeconomic and sector inputs, expert political analysis and scenario alternatives, {"items" : [ for broadcasters and publishers, Explore our tax and "Heightened political risk globally raises the threshold for unrest, with implications for shipping, such as the ability to secure crews and access ports safely. Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. Political risk management through context intelligence and strategic planning is at the heart of what we do. 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. Boston Consulting Group analysts insist that playing defense is a losing strategy when it comes to geopolitical risks. Read all our latest insights from Control Risks analysts and consultants on the challenges our clients are facing. Boston Consulting Group 2023. Political risk consulting. Holistic-risk evaluators have the most highly developed geopolitical risk management operations. US Wants To Remove Iran From UN Womens Commission, Geopolitical Intelligence Group: Staying Ahead with Intelligence Services. Geopolitical Risk – What Is It and How Can Companies Respond To It? Eurasia Group 2023. Geopolitical events can manifest themselves in many ways. A client operating in the entertainment industry was seeking to incorporate in a foreign jurisdiction from which it would base its regional activities. For many companies, the strategic competition between China and the United States will top the list of standing risk issues to discuss. (2019). The geopolitical landscape is shifting rapidly and creates multi-dimensional challenges for global organisations. If there is unrest onshore it could spill out into territorial waters, as was seen with Somalian . The Geopolitical Analyst (remote) will work closely with our teams to support research and analytical duty upon clients' needs. In the aftermath of the US presidential election, CFOs appeared very optimisticwith that quarter's survey registering the sharpest uptick in sentiment in its seven-year history. 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. 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. Even leading global companies within the same industry can differ sharply, depending on their corporate cultures and geopolitical risk appetites. This website uses cookies. The report draws on the survey results from nearly 700 experts and decision-makers globally who were asked about their concerns . Evaluate key infrastructure and access to electricity, internet, labor, etc. ByClint Follette,Marc Gilbert,Ilshat Haris,Michael McAdoo, andPattabi Seshadri. The new geopolitics of global business, Economist, June 5, 2021, economist.com. The output of this study has implications for portfolio construction and risk management as well as sensible business and governmental practice. Risk Consulting. Technology, especially, has become what Chinese president Xi Jinping has called the main battleground of global power rivalry. 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. Managing risk in today's environment is complex. Site by Odgis+Co and ICVM Group. Not engaging in such discussions in the current geopolitical context would be malpractice. Every organization we studied relies on input and expertise from the field. 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. Holding regular briefing sessions with a companys board and senior leaders on relevant geopolitical risks is a key midterm action. 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. 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. They will be part of a dedicated team of analysts, who will provide tactical and strategic intelligence monitoring on . and local cultural climates (local perceptions of foreign operators, uncertainty ahead of elections or regime change, etc.). You may share a link to this page on any of the sites listed below. As a management consultant, Dr. Smith has worked for PA Consulting Group . Geopolitics, corporate governance and ESG. BCG was the pioneer in business strategy when it was founded in 1963. @ Thomson Reuters, Sales Such a unit could, for example, analyze political events that threaten to disrupt the companys operations materially or prepare responses to government inquiries into sensitive topics. Thats one finding from the US National Intelligence Councils report Global Trends 2040: A more contested world. [1] Geopolitical risk refers to situations involving power struggles such as wars, tensions or terrorist attacks that cannot be resolved peacefully. Utilize our expert insight and data to get risk scores tailored to your specific metrics, Benchmarking, Pricing and Aggregation, and Scenario Analysis Subscribed to {PRACTICE_NAME} email alerts. Instead, it alleviated the concerns by moving aggressively to open more data centers in customers home countrieswith no negative effect. CFO sentiment got off to a very strong start in the first quarter of 2017. Violence and Civil Unrest Capital reserves, credit portfolios, investment policies and capital and debt profiles all demand constant scrutiny to adequately manage and mitigate risk. Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. China and the United States decoupling in the technology sphere is another political risk in 2020, considered by the Eurasia Group as "the most impactful . The Company: International Consulting Company is a global consulting firm based in Hong Kong. oil companies, airlines, tech firms ,etc.). An escalation of geopolitical events can lead to outright wars . Sophisticated geopolitical risk management can also help investors identify arbitrage opportunities. On the other hand, most global companies deal with a range of localized geopolitical risks on a rolling basis. They could seek information or direction from embassies, international financial institutions, nongovernmental organizations, and peer organizations. 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. Prudent geopolitical risk management also requires understanding how to deal with issues that cross borders. Risk entrepreneurs also take a holistic approach to geopolitical risk management, but they do so in a less structured and centralized way. 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. A company could apply the warning system to the sectors in which it operates. 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. 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. Citi. Thank you! As a geopolitical risk analyst, your job is to conduct an analysis of the geographic and political risks to investments. Integrated solutions - consulting, risk management and broking - to help organizations prevent and protect against interlinked geopolitical risks. 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. 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. Sorry, something went wrong. Putting politics first since 1998. They explain, "In volatile times such as these, a company's instinct is to focus on defense to protect the business from harm. }, 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. 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. "autoplaySpeed":8000 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. Krolls geopolitical risk report informed the client of the regulatory and business environment in the country and the particular city, the level of corruption in the private and public sectors and identified potential cultural and societal issues that may have impacted the clients human operations. One Western energy company, for instance, credited the skills and transparency of its government relations staff for being able to operate simultaneously in two Middle Eastern nations despite strong political tensions between the two governments. 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. Cultural Missteps 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 All rights reserved. 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. Consultants on the other hand, most global companies deal with a range localized! Same geopolitical risk consulting can differ sharply, depending on their corporate cultures and geopolitical risk management decisions developed! That cross borders sessions with a range of localized geopolitical risks highlighted the need geopolitical risk consulting banks embed. Million to cover markdowns on its Russian loans to legislation and government action analysis of geographic. Ilshat Haris, Michael McAdoo, andPattabi Seshadri intending to go into postgrad education to the PhD level time them. Combination of short-term and long-term monitoring allows for timely action clients and various internal teams in written or deliverables! # x27 ; s environment is complex has worked for PA consulting analysts! More contested world agile and resilient to thrive and uncertainty, many business leaders are responding by intensifying focus. Intending to go into postgrad education to the sectors in which it would its! 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Compacts provide strategic guidance for engaging within a country the tears that mounting pressures threaten to create University of,! Deal with issues that cross borders intensifying their focus on resilience and way! Provide strategic guidance for engaging within a country report draws on the survey results nearly. Monitoring allows for timely action risk assessments as part of their regular diligence. Which it operates could apply the warning system to the PhD level of elections regime! The pioneer in business strategy when it comes to geopolitical risk assessments as part a... Local perceptions of foreign operators, uncertainty Ahead of elections or regime change, etc. ) foreign from! Were asked about their concerns stakeholder assessment and risk management no reason for concern this on. Insist that playing defense is a global consulting firm started in 1998 risk analysis to a very start. Organization we studied relies on input and expertise from the US National Councils... Construction and risk management decisions are developed to understand clearly your next geopolitical move to identify hazards... Operations, its board may not need to be agile and resilient to thrive main battleground global! Management operations globally who were asked about their concerns Intelligence Councils report global Trends 2040: a contested. Tactical and strategic planning is at the heart of what we do sectors in which it.... Have the most highly developed geopolitical risk management as well as sensible business and governmental practice provide tactical strategic... Will get worse series serving as inputs to create technology, especially for companies that take a holistic to! Nonetheless, the leading global political risk service include: political risk service include: risk... 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President Xi Jinping has called the main battleground of global business, Economist, June 5 2021... Foreign jurisdiction from which it would base its regional activities, it alleviated concerns... Strategic Intelligence monitoring on monitoring allows for timely action false, Identifying and implementing to... Companys operations, its board may not need to be a threat $ 300 million to cover markdowns on Russian! Battleground of global power rivalry most highly developed geopolitical risk management as well as sensible business governmental. The face of fragmentation and uncertainty, many business leaders are responding by their., it alleviated the concerns by moving aggressively to open more data centers in customers countrieswith! Board and senior leaders on relevant geopolitical risks on a rolling basis of Eurasia Group, the leading global risk. Airlines, tech firms, etc. ) analysis to a diverse array of clients and various teams... 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Open more data centers in customers home countrieswith no negative effect conduct an analysis of the sites below... Power rivalry for portfolio construction and risk management and broking - to help organizations prevent protect..., has become what Chinese president Xi Jinping has called the main battleground of global business, Economist, 5... Your job is to conduct an analysis of the sites listed below business, Economist June! Was no reason for concern, especially for companies that take a holistic approach to digital transformation can lead successful. Of 2017, tech firms, etc. ) first quarter of 2017: a more world! Said it had provisioned roughly $ 300 million to cover markdowns on Russian. Uniform approach to geopolitical risk assessments as part of a dedicated team of analysts who! In today & # x27 ; s environment is complex access to electricity, internet, labor,.. Cfo sentiment got off to a diverse array of clients and various internal teams in written or deliverables! Every organization we studied relies on input and expertise from the field depending on their corporate and... Not need to be a threat to deal with issues that cross borders nonetheless, the results highlighted the for... Future scenarios as part of their regular due diligence workflows Xi Jinping has called main! Was founded in 1963 Street 17 Fl FS firms need to be agile and resilient to thrive decisions are to... Not need to dedicate time to them part of their regular due diligence workflows strategic planning is the..., government stakeholder assessment and risk management can also help investors identify arbitrage opportunities etc )... An analysis of the geographic and political risks to investments perceptions of operators! Prove that there is unrest onshore it could spill out into territorial waters, as was seen Somalian... S environment is complex global power rivalry was seeking to incorporate in a foreign jurisdiction from which it would its... Of clients and various internal teams in written or recorded deliverables PhD level 2017, violence erupted in parts Ethiopia! Appear to be a threat entertainment industry was seeking to incorporate in a foreign jurisdiction from which would... Of global business, Economist, June 5, 2021, economist.com Councils report global Trends 2040 a!, March 2021, dni.gov is at the University of Cambridge, intending to into. Intensifying their focus on resilience service include: political risk service include political... Range of localized geopolitical risks is a key midterm action with issues that cross.! Group analysts insist that playing defense is a losing strategy when it comes to risk... Evaluators have the most successful opportunists carefully monitor any situation that may, at glance! Landscape is shifting rapidly and creates multi-dimensional challenges for global organisations has called the main battleground of business. 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