Global geopolitical risk and economic uncertainty have increased dramatically over the past decade, according to leading indices. 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. trust us to help them make informed decisions, Professional services One energy company, for example, established a country chair position, which is typically assigned to the most senior business executive in a given country and is seen as a prestigious step toward advancement to top management. Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. In such discussions, its of utmost importance to make sure that all affected geographic regions are represented. GIG has nearly 2 decades of high-level experience consulting to a comprehensive portfolio of local and international clientele encompassing the government, corporate and private sectors. As the former Intel CEO Andy Grove famously put it, Only the paranoid survive. Partner & Director, Global Trade & Investment, Managing Director & Senior Partner; Global Leader, Energy Practice. Case Study 1 Eurasia Group 2023. Unstable regimes or upcoming elections may also pose a risk as potential new governments may have unfavorable views towards certain foreign firms. 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. 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. Cyber risks are believed to have the deepest impact on supply chains rated by 34% as a high impact and 54% as medium. Forecasting government action and decisions. FS firms face a "trilemma" of rising inflation, energy insecurity and disrupted supply chains, as well as longer-term geopolitical change and megatrends. | Learn more about Avery Benton's work experience, education, connections & more by visiting their . New York NY 10055. They then proactively address the emerging threat to gain competitive advantage. In 2020, it will move beyond strategic tech . 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. We study the dynamic effect of industry- and firm-specific geopolitical risk on firm-level investment. Yet few companies consistently act on it. 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. We have developed an analytical tool for assessing an organizations geopolitical risk management practices and opportunity. Independent data and analysis for opportunity sizing, local partner selection, government stakeholder assessment and risk assessment. A compact could include a traffic-light-style warning system with red, yellow, and green lights that represent escalating risk levels. Consider the trade-offs of framing how the company talks about itself in a specific way, if that narrative could create conflicts with external or internal stakeholders, and what the potential remedies could be. Political risk monitoring. An escalation of geopolitical events can lead to outright wars . However, it added, only a subset of chief risk officers (CROs) recognize this.. Our geopolitical risk intelligence solutions provide end-to-end coverage of political, violent, sovereign, banking and investment risk worldwide. [1] Geopolitical risk refers to situations involving power struggles such as wars, tensions or terrorist attacks that cannot be resolved peacefully. 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. 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. Geopolitics is "the study of the effects of Earth's geography (human and physical) on politics and international relations.". Part of managing geopolitical risk is considering the ramifications of a companys core narrative. 4. 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. 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.. . 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. Get the latest news and intelligence on global issues impacting business, politics, economics, military, security and energy. Our global multidisciplinary teams offer strategic legal and regulatory advice to help . many global companies are seeking their own form of strategic autonomy to navigate ChinaUS relations. Companies may want to gather internal and external perspectives before deciding what to include in market compacts. Our operational and strategic advisory services inform our clients with valuable . Yet, companies find Geopolitical Risk difficult to fully understand and even more challenging to manage. Subscribed to {PRACTICE_NAME} email alerts. being employed directly by an oil firm or airline . "Heightened political risk globally raises the threshold for unrest, with implications for shipping, such as the ability to secure crews and access ports safely. Channeling the policy debates under way in the European Union, Convert risk into opportunity with bespoke solutions. 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. Considered among the world's foremost experts in their respective subject areas, our analysts provide tailored support to the world's top investors, executives . by The geopolitical risk firm that helps you understand the world. 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. Such external pressures exert other internal pressures on corporate leaders. All qualified applicants will receive consideration for employment without regard to race, color, age, religion, sex, sexual orientation, gender identity / expression, national origin, protected veteran status, or any other characteristic protected under federal, state or local law, where applicable, and those with criminal histories will be considered in a manner consistent with applicable state and local laws.Pursuant to Transparency in Coverage final rules (85 FR 72158) set forth in the United States by The Departments of the Treasury, Labor, and Health and Human Services click here to access required Machine Readable Files or here to access the Federal No Surprises Bill Act Disclosure. 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. Business strategy and operational efficiency require constant evaluation in a complex and often volatile environment. 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.. American Express. BCG's international trade consulting experts help companies make the right movesand mitigate riskto unlock competitive advantage. Sign in with your username. Today, the company has offices in New York, Washington, and London, as well as a network of experts and resources around the world. Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. 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. These circumstances can leave traditional risk management systems and teams flatfooted. 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. Geopolitical risk is the number one global corporate risk. A confirmation email has been sent to you. In the face of fragmentation and uncertainty, many business leaders are responding by intensifying their focus on resilience. Taking a bionic approach to digital transformation can lead to successful business outcomes. 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. for political and security risk firms that sell their services or analysis to client companies (e.g. The role will be the global lead for looking at Geopolitical Risk across Nokia and what those impacts to might mean to Nokia's business and people. 2 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. A counterparty who defaults on a contract, or whose business . 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. With the government expropriating many of these companies, foreign firms found themselves needing to conduct additional due diligence on their Turkish counterparties to determine their relationship with the government. Prudent geopolitical risk management also requires understanding how to deal with issues that cross borders. We provide objective and detailed standardized and bespoke risk assessments to companies, investor groups and governments in Africa, Asia, the Middle East and Latin America. Geopolitical events, generally speaking, occur at the intersection of geographical factors (natural resource access, proximity to countries in turmoil, etc. In extreme cases, a disruptive event can jeopardize an entire business. Accurately forecast, quantify, and compare the financial viability of new investments and existing business activities by sector and project type, Bespoke Risk Scoring Systemic-risk managers adopt a primarily defensive position, focusing on protecting their businesses from the downsides of change. Russia's invasion of Ukraine has . }, 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. Financial risks have probably never been more acute. Our intelligence analysts are building on 20 years experience in understanding political risks faced by our clients in insurance and financial services. Understand counterparty risk with forward-looking analysis of reputational, legal and political risks associated with new or existing partners, Risk Quantification Not many bankers want to grapple with that shift because it is inconvenient and depressing.. Sign up to receive periodic news, reports, and invitations from Kroll. strategy. Operations in countries with poor human rights records can cause supply chain disruptions but can also lead to reputational damage and give rise to class action lawsuits, public boycotts or stockholder divestment campaigns. Ian Bremmer is the president and founder of Eurasia Group, the leading global political risk research and consulting firm started in 1998. FS firms need to be agile and resilient to thrive. Shipping will increasingly be drawn into geopolitical disputes," says Kinsey. Some of these political consulting clients include: Airbnb. Seek to continuously measure and monitor the impact of geopolitical risk management activities on the business. Each event carries it own risks, and each risk its own consequences. Part of managing geopolitical risk is considering the ramifications of a companys core narrative. They may have to balance, given the risks, near- and long-term market priorities. Geopolitical events can manifest themselves in many ways. Internationally it poses increasing management challenges, particularly at board level. Coco Feng, Chinese president Xi Jinping seeks to rally countrys scientists for unprecedented contest,. 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 challenges that geopolitical risks create will get worse. Geopolitical Risk – What Is It and How Can Companies Respond To It? Companies must consider how to harness capabilities such as 5G and AI without falling victim to geopolitically based regulatory or reputational cross fire. For the past three decades, going global meant unlocking specialization and . 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. The firm serves financial institutions, private equity . 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. Related Expertise: Creating risk management strategies through deep industry expertise, advanced analytics, and specialist global knowledge to help you optimize your business. As a result, they fail to examine the broader strategic landscape, full range of risk scenarios and consequences, or key decision points. Improve your understanding and modeling of country and economic risk across countries and sectors. Andrew Grant is a senior partner in McKinseys Auckland office; Ziad Haider, based in the Singapore office, is the head of geopolitical risk and a director of risk in Asia; and Alastair Levy, based in the London office, is the global director of risk. This combination of short-term and long-term monitoring allows for timely action. With geopolitical risk on the rise in advanced economies, the house view on opportunity in markets such as the US, the UK, and China has become elusiveand boards and management teams are often divided on where to invest or allocate capital for long-term growth. Theyre the equity investors that reap rich returns by snapping up stakes in undervaluedbut soundassets in the challenging emerging markets that others shun. 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