International Business, March 30, 2021 5-minute read. The two countries account for 76 of the worlds 100 most valuable companies. 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. BCG was the pioneer in business strategy when it was founded in 1963. Already a member? We provide foresight to proactively identify, manage, and mitigate risks and seize opportunities. The degree to which banks systematically analyze political risks varies across the industry. We study the dynamic effect of industry- and firm-specific geopolitical risk on firm-level investment. & account inquiries, For CA: Do not sell my personal information. 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. 4 Yet few companies consistently act on it. We have developed an analytical tool for assessing an organizations geopolitical risk management practices and opportunity. Otherwise, internal fissures can build and burst in a way that damages culture, reputation, and performance. Expropriation 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. We offer our . Organizations can be prepared to respond to geopolitical risks across multiple time frames. 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. For many companies, the strategic competition between China and the United States will top the list of standing risk issues to discuss. . Successful geopolitical risk managers tend to hire a cadre of personnel with experience in doing business in the market and dealing with local agencies. Related Expertise: iStrategic LLC is a Political Risk Analysis and Consulting firm specializing in the Middle East and North Africa region. Nowhere is the fallout from current geopolitical tensions more apparent than the unfolding competition between China and the United States. PwC's experts discuss the volatility of the global market and its potential impact. by Country risk mapping. Putting politics first since 1998. One consumer packaged goods company we studied has developed a strong knowledge-sharing culture among functional networks. 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. 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. It is by no means certain that they are ready for the next major crisis, experts say. 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 Volatility and Risk Institute has embarked on a study of geopolitical risk and its relation to financial risks. As a result, the company was able to significantly expand its cloud business and gain advantage over competitors that were slower to act. Complying with anti-money laundering and anti-bribery and corruption regulations. SVA. "Heightened political risk globally raises the threshold for unrest, with implications for shipping, such as the ability to secure crews and access ports safely. Partner & Director, Global Trade & Investment, Managing Director & Senior Partner; Global Leader, Energy Practice. Industries that are positively exposed to geopolitical risks suffer a decline in investment that is larger than the aggregate effect. Human Rights Violations Any discussion of such potentially existential issues must start at the top. These organizations take many forms. Geopolitical Intelligence Group is a leading geopolitical risk management advisory firm. 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.. 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. Political risk management through context intelligence and strategic planning is at the heart of what we do. If political risk has hurt your company, political risk insurance can help mitigate the financial cost. MAX's Geopolitical Intelligence Services knows your part of the world because we're part of it too. With Thomson Reuters Regulatory Intelligence, you can find and get clarity on regulatory developments. 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. 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. Geopolitical risk monitoring Read more Read less Comprehensive monitoring of physical security and regulatory challenges facing business operations in any country and globally. Companies are walking a geopolitical tightrope. We call these archetypes holistic-risk evaluators, risk entrepreneurs, systemic-risk managers, and nascent-risk managers. 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.. 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.. Russia's invasion of Ukraine has . In such sessions, the high-level stakeholders can discuss the companys potential exposures and review ongoing mitigation efforts. 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. Casper Wuite, 55 East 52nd Street 17 Fl Conduct time-efficient international policy monitoring and updates. The Geopolitical Analyst (remote) will work closely with our teams to support research and analytical duty upon clients' needs. How to factor geopolitical risk into technology strategy | EY - US Trending US pandemic response and relief funding - proactively mitigating fraud, waste and abuse 2 Feb 2023 The COO Imperative: How human emotions can unlock supply chain success 23 Jan 2023 Consulting 2023 Global economic outlook: Transforming uncertainty into opportunity Designed for pro-active corporate security teams with granular forecasts and location specific risk analysis for 211 geographies. And a narrative that works in one place could inhibit market opportunities in another or create sensitivities among regions. Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. 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. Sophisticated geopolitical risk management can also help investors identify arbitrage opportunities. 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. Geopolitics is personal. BCG X disrupts the present and creates the future by building bold new tech products, services, and businesses. Citi. Supporting corporate third-party management programs to drive risk-based due diligence decisions. 4. Even leading global companies within the same industry can differ sharply, depending on their corporate cultures and geopolitical risk appetites. Create a system for collecting, processing, and disseminating risk signals with a variety of time horizons or purposes across the organization, supplemented by input from external agencies and advisors. 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. (2019). Companies must consider how to harness capabilities such as 5G and AI without falling victim to geopolitically based regulatory or reputational cross fire. trust us to help them make informed decisions, Professional services Because the company sells its products almost everywhere, problems that pop up in one country often may have already been solved in another. We provide geopolitical risk consulting and advisory services and solutions that are timely, market-relevant and forward-looking. 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. . Understand counterparty risk with forward-looking analysis of reputational, legal and political risks associated with new or existing partners, Risk Quantification Experienced in political affairs, non-profits, articles and blogs, with demonstrated skills in research and analysis on politics, policy, and history. Business strategy and operational efficiency require constant evaluation in a complex and often volatile environment. 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 provide objective and detailed standardized and bespoke risk assessments to companies, investor groups and governments in Africa, Asia, the Middle East and Latin America. Kroll is not affiliated with Kroll Bond Rating Agency, In much the same way that companies screen for ultimate beneficial ownership or reputational risk as part of their pre-investment or pre-partnership due diligence processes, companies should conduct geopolitical due diligence before entering an emerging or volatile market or ahead of a business partnership with a company in a jurisdiction that they dont have a deep understanding of. your toughest business challenges, Government professionals Andrew Cuomo, Governor (NY) Bill & Melinda Gates Foundation. Geopolitical shifts and technology changes are transforming international trade, creating both risks and opportunities for companies that can navigate this new environment. 5 Indeed, in its most recent geopolitical risk dashboard, the BlackRock Investment Institute put a technological decoupling between China and the United States as the third highest risk, with a widening of the conflict in Ukraine between NATO and Russia and major cyber-attacks causing significant damage to infrastructure and financial markets seen as the top two risks. All rights reserved. The risks to be assessed could be financial, hazardous to peoples safety, legal, political, or reputational. Sign up to receive periodic news, reports, and invitations from Kroll. Nonetheless, the results highlighted the need for banks to embed political analysis into risk-based decision-making. 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,. But in the age of instant information, the story a company tells about itself in one market wont stay there. Sydney Olympic Park NSW 2127 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. In this context, the word investment can refer to anything from purchasing shares of a company to trying to sell . Some of these political consulting clients include: Airbnb. Improve your understanding and modeling of country and economic risk across countries and sectors. 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 No matter their starting point, BCG can help. Sorry, something went wrong. Our main office is located in Oslo. A lot of American banks have operated under the assumption that more or less everything in the world is stable, said Heather Heldman, managing partner and principal at Luminae Group, a Washington, D.C.-based geopolitical risk consulting firm. Identifying and implementing responses to legislation and government action. 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. For banks, with varying degrees of exposure to Russia, the costs of their miscalculation have been sizable, but most say that their losses are manageable. Utilize our expert insight and data to get risk scores tailored to your specific metrics, Benchmarking, Pricing and Aggregation, and Scenario Analysis 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. People may worry that a company will hold itself to different standards in different regions. 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. 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. Not surprisingly, several oil and gas companieswhich often make large, long-term investments in high-risk countries amid frequently shifting environmental-protection policiesfall in this category. 11 Jan 2023 CEO agenda Six ways asset managers can prepare for an uncertain future 2 Feb 2023 Wealth and asset management However, it added, only a subset of chief risk officers (CROs) recognize this.. Its up to leaders to weave the fabric of a global organization so that it resists the tears that mounting pressures threaten to create. We'll email you when new articles are published on this topic. 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. Questions to ask about key business risks arising from geopolitical and related crises Strategic, operational, financial and compliance risks are common level-one risk categories that board members and management need to consider. 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