Geopolitical risk: the must-tackle issue for your board

Geopolitical risk: is your board talking about it? If so, do they know how to handle it?

The harsh reality right now is that many companies simply can’t do so properly. But stakeholders are rarely patient when it comes to geopolitics. When something happens, they want a response from your corporate leadership. 

The last thing your board needs to be caught off guard – unaware of how to handle a situation, of what to say, of how to adapt your strategy to changing global events. 

Let’s dive in further:

It’s rooted in global conflict and politics. You likely know most of it if you keep up with current events. The challenge is processing that it’s all happening at once. 

The news cycle is now dominated by the Israel-Hamas war and polarised global elections. Before that, the spotlight was on the Russian invasion of Ukraine; not so long before that was the United States’ chaotic withdrawal from Afghanistan. 

Meanwhile, we’ve got tensions between major global powers like the US, Russia, China, Iran, the EU, South Africa, and Brazil. Animosity runs deep, fuelled by conflicting political goals and historic hostility. Then there are protests about climate, elections, social issues, and international relations. All of this comes on top of the protracted conflicts that are so ingrained in the fabric of modern geopolitics that most of us have stopped talking about them – such as the conflict in Yemen or the drug war in Mexico. 

Every single geopolitical crisis begins a new chapter of geopolitical pressure in corporate playbooks.

It’s essential; it’s not going away, and depending on your company, it could be one of the most crucial strategic elements of all. 

It doesn’t even have to come from something direct – such as your company’s stance on a particular issue; it could be indirect too, like the businesses you work with in your supply chain. As an example, many American companies have been switching their manufacturing bases from Chinese factories to other locations, such as Vietnam, out of fear that Chinese authorities could disrupt their business at the drop of a hat.

The major worry with geopolitical risk is that, right now, many companies simply don’t have the expertise to deal with it. 

There’s no escaping the likelihood of stakeholders demanding responses when geopolitical crises hit. 

Corporate leaders will be prodded by investors wanting to know if the company can survive through sanctions or by consumers wanting to see a company’s response to escalating conflict. The storm of questions will come; the challenge is weathering it correctly.

Experts in geopolitical risk will have all of the following skills:

• They have a deep understanding of corporate strategy and risk. 
• They are incredibly knowledgeable in global affairs, new or potential conflicts with worldwide impacts, and the intricacies of trade, sanctions, and the knock-on effects of government changes on international relations. 
• They know how to navigate through substantial geopolitical fallouts – like Israel-Hamas or Ukraine.

The loaded and rapidly-changing news cycle at the moment suggests that former diplomats or similar professionals will be in heavy demand for NED positions because they have a huge amount to offer, even in an advisory capacity.

The hard part is that there’s no definite answer to this question. 

Finding the right candidate to fill a board seat depends on multiple things, like the availability of talent, training, networks, and an alignment of values. In some situations, this is a heavy ask. 

It’s also worth noting that the market for geopolitical expertise is highly active right now as companies realise en masse that they need to be prepared.

Not so much worried, but you should realise that the quest for geopolitical experience in your board may be a long game. 

It takes time to find the talent that works well for your business – and it’s time that stakeholders may not always give you, prodding you for an answer now, never accepting that you’d like to wait before you say anything. 

That’s why it’s essential to start now on geopolitical expertise if you haven’t already. If it feels like catch-up at the moment, it won’t always. Eventually, you will have solid knowledge on your board to develop thorough answers to complex questions. 

In reality, the world always moves faster than corporate governance is comfortable with, so it’s better to get ahead. Sensibly; especially when it comes to a topic like this.