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 organizations appetite for riskit helps create consensus across leadership on the issues of the day. But in the age of instant information, the story a company tells about itself in one market wont stay there. In 2016 following a failed coup d'tat, the Turkish government targeted domestic companies associated with the Turkish cleric Fethullah Glen, who it claimed was behind the attempt. Case Study 1 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. Understand counterparty risk with forward-looking analysis of reputational, legal and political risks associated with new or existing partners, Risk Quantification 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. Systemic-risk managers adopt a primarily defensive position, focusing on protecting their businesses from the downsides of change. Our main office is located in Oslo. Coco Feng, Chinese president Xi Jinping seeks to rally countrys scientists for unprecedented contest,. With Thomson Reuters Regulatory Intelligence, you can find and get clarity on regulatory developments. The Chertoff Group leverages this broad and deep expertise . Utilize our expert insight and data to get risk scores tailored to your specific metrics, Benchmarking, Pricing and Aggregation, and Scenario Analysis Eurasia Group analysts leverage deep country and thematic expertise with quantitative methodologies to forecast fast-moving risks and opportunities. Instead, boards can dedicate regular standing time to analyzing how to respond to the geopolitical risks that their enterprises face as part of a broader board effort to build more resilient companies. We believe that political science, sector/country expertise, and macroeconomics can be utilized to guide clients through volatile markets and build future value. Geopolitics is personal. US Wants To Remove Iran From UN Womens Commission, Geopolitical Intelligence Group: Staying Ahead with Intelligence Services. Trade Wars and a Stronger Europe. 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. Human Rights Violations By closely monitoring growing public support for greenhouse gas mitigation measures in many countries, for example, a leading oil-and-gas company was able to invest in renewable natural-gas technologies much earlier than its peers. Some of these political consulting clients include: Airbnb. 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. Nowhere is the fallout from current geopolitical tensions more apparent than the unfolding competition between China and the United States. 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. 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. 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. SVA. Exploring government strategy. We have developed an analytical tool for assessing an organizations geopolitical risk management practices and opportunity. (See Exhibit 1.) Channeling the policy debates under way in the European Union, We offer a unique combination of advanced analytical methods and an innate understanding of intelligence gathering other security sources don't possess. 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 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. @ Thomson Reuters, Sales When companies consider opportunities in emerging or volatile markets whether through acquisition, merger or growth it is essential for them to understand the potential impact that geopolitical events can have on their business activities. Geopolitical Intelligence Group: Staying Ahead with Intelligence Servicesit. being employed directly by an oil firm or airline . Such a test would include a time frame for execution and possible technical options. Please try again later. Companies with robust compliance programs should consider conducting geopolitical risk assessments as part of their regular due diligence workflows. Managing geopolitical risk. 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. (2019). 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. 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. 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. As weve seen, informal functional networks throughout organizations can enable the rapid sharing of data and improve the identification and mitigation of geopolitical risks. Sign up to receive periodic news, reports, and invitations from Kroll. Geopolitical risk is the number one global corporate risk. Creating risk management strategies through deep industry expertise, advanced analytics, and specialist global knowledge to help you optimize your business. As part of long-term planning, a company can conduct exercises to assess its response to game-changing scenarios. Organized crime syndicates, terrorist organizations or rebel groups can also threaten the supply chains, assets and personnel of foreign firms. Subscribed to {PRACTICE_NAME} email alerts. Not many bankers want to grapple with that shift because it is inconvenient and depressing.. 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. Idiosyncratic geopolitical riskconstructed using the transcripts of firms' earnings calls, and The geopolitical risk firm that helps you understand the world. 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. 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 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. The challenges that geopolitical risks create will get worse. 1. As geopolitical events can influence market conditions in industrialized countries just as much as they can impact developing countries, assessing and understanding them through the conduct of an effective geopolitical risk assessment will help mitigate risk exposure. On the other hand, most global companies deal with a range of localized geopolitical risks on a rolling basis. We support each client's unique risk profile . 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. "Heightened political risk globally raises the threshold for unrest, with implications for shipping, such as the ability to secure crews and access ports safely. 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. They may have to balance, given the risks, near- and long-term market priorities. Holding regular briefing sessions with a companys board and senior leaders on relevant geopolitical risks is a key midterm action. 5 This combination of short-term and long-term monitoring allows for timely action. . A holistic view uses four lenses: global geopolitical trends and scenarios, ongoing operations, investment decision making, and frequent monitoring of evolving events and development that can affect the business. Andrew Cuomo, Governor (NY) Bill & Melinda Gates Foundation. 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. {"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. 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. Something went wrong. Stakeholder and Influence Mapping 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. 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. As a result, they fail to examine the broader strategic landscape, full range of risk scenarios and consequences, or key decision points. But the discussions often focus on a specific investment, project, or market entry or exit. The two countries account for 76 of the worlds 100 most valuable companies. As a result, the company was able to significantly expand its cloud business and gain advantage over competitors that were slower to act. 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. Norwegian Risk Consulting International - NRCI - is a geopolitical risk consultancy founded in 2010. 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. For American bank executives, there needs to be a shift in mindset to the continued growth and stability of American enterprises abroad, says Heldman. 1. Sign in with your username. Geopolitical Intelligence Group (GIG) is a leading provider of intelligence services, offering strategic and operational insights into the complex geopolitical environment that affects businesses. Even leading global companies within the same industry can differ sharply, depending on their corporate cultures and geopolitical risk appetites. The Company: International Consulting Company is a global consulting firm based in Hong Kong. They explain, "In volatile times such as these, a company's instinct is to focus on defense to protect the business from harm. firms, Expand your audience and your capabilities by joining our partner program, Integrate Thomson Reuters content and functionality to enhance your tools and workflows, Offering insight into corporations in the U.S. and abroad, Insights on issues concerning environmental, social, and governance topics, A look into the inner workings of government and the courts, Legal coverage focusing on the business and practice of law, Featuring an expanded insight into the world of tax professionals, Technology and innovation resource center, Exploring how technology and innovation will influence the evolution of future services, About Thomson Geopolitical events can manifest themselves in many ways. Eurasia Group's advisory and consulting business is built upon a research platform of leading political risk analysts and management consultants with deep country and sector expertise. ), policy decisions (limits to foreign direct investment, tolerance of corrupt elites, etc.) Complying with anti-money laundering and anti-bribery and corruption regulations. Marcin Grajewski, The EU strategic autonomy debate: What think tanks are thinking, European Parliament Think Tank, March 30, 2021, europarl.europa.eu. 3 Commodity prices rose sharply 4 after Russia . All rights reserved. Reporting focuses on both incident analysis and trend monitoring, providing forward looking assessments to facilitate proactive risk management decision making and asset . Some may, for commercial and strategic reasons, choose to strengthen ties to the countries where the companies are based. Managing risk in today's environment is complex. 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. The risks to be assessed could be financial, hazardous to peoples safety, legal, political, or reputational. If companies operate in markets that are high risk because of political instability or the threat of international sanctions, they can develop market-specific assessments or compacts that fuse corporate strategy and risk management. Conduct time-efficient international policy monitoring and updates. This website uses cookies. 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. 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. Geopolitical risks affecting banks or banks customers have expanded significantly in recent years, according to a global survey report issued late last year from consulting firm EY. Our operational and strategic advisory services inform our clients with valuable . Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Our intelligence analysts are building on 20 years experience in understanding political risks faced by our clients in insurance and financial services. . New York NY 10055. In 2020, it will move beyond strategic tech . Compacts provide strategic guidance for engaging within a country. Global geopolitical risk and economic uncertainty have increased dramatically over the past decade, according to leading indices. 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. For that reason, a company may need to issue guidance on a range of other topics, such as the appropriate way to discuss geopolitically sensitive topics in publications or speeches and how to depict contested borders on maps. MAX's Geopolitical Intelligence Services knows your part of the world because we're part of it too. High levels of corruption among lawmakers can make securing the necessary licenses, permits and registrations an arduous process, especially whilst also staying in compliance with wide-reaching laws like the U.S. FCPA. Meanwhile continuing shortages of raw materials (39%), logistics and warehousing (35%) and components (33%) are all . "speed": 600, 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. Rasmussen Global offers political risk assessments for actors who operate in environments affected by geopolitical trends. Integrate geopolitical signals and risk assessment into strategic-planning processes and define actionable strategies to both protect the business and take advantage of emerging opportunities. | Eurasia Group is the world's leading global political risk research and consulting firm. In volatile times such as these, a companys instinct is to focus on defenseto protect the business from harm. your toughest business challenges, Government professionals Industries that are positively exposed to geopolitical risks suffer a decline in investment that is larger than the aggregate effect. 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