Businesses have to base their decisions on forecasts of many variables which are subject to geopolitical risk. Geopolitics means the relationships between countries, leaders, cultures, political systems. Geopolitics is relevant to companies and investors because it influences economics, confidence, trust, regulation, demand, market access, tariffs, economic policy, conflict, war, government spending, freedom of travel, government policy, energy prices, commodity prices.
You can't perfectly predict the future and very often we don't see huge changes coming. Geopolitical risk is complex with many variables and causal relationships are often unclear. It's not possible to prepare for every eventuality.
So how can a business mitigate geopolitical risks? What can a business do to foresee the future and be prepared to adapt, to cope with risks, to seize opportunities and to thrive?
There are 3 main things companies do to manage the risk:
1. Diversify investments across more countries or industries
2. Avoid or decrease investments in certain risky countries
3. Geopolitical analysis before new investment
There are many companies offering geopolitics assessments for companies. What you should bear in mind is that even if they are very professional, give the appearance of being academic or lead by some senior public figure, it's impossible for anyone to know everything, all the variables all the complexity, all of the unseen dynamics, unknown information which influence world politics and their effect on business. Also realise they they are often biased by standard elite groupthink assumptions.
How many of these wise advisors warned companies about the COVID-19 pandemic, even when it was active already in China?
How many of these wise advice as predicted the fall of the Berlin Wall, the Iranians revolution, the Brexit vote, election of President Trump, the financial crisis, the Iranians attack on the Saudi oil industry, the Russian invasion of Ukraine, the Arab Spring And many more? Of course the answer is, few, if any.
Even if we see things coming, do we prepare for them? People have been saying that the world was due for a pandemic for decades. How many companies had thought through how they would react to that? In 1904, the Russian Navy identified the risk of a successful attack by the Japanese Navy in the Pacific. The research was great but they didn't act on it. By 1905, their fleet was at the bottom of the ocean.
A geopolitical risk assessment tests the strategy and business model for resilience to:
- Conflict, terrorism, insurgency and civil unrest
- Strategic shocks
- Hybrid warfare
- Cultural misunderstanding/sensitivities
- Government policy, trade policy, tarriffs
- Changes in political leadership, elections
- Political instability
- Corruption
- Poor governance, regulation and licensing
- Criminal threats
- Tax and Legal system integrity for FDI
- Breaches of contract
- Intellectual property threats
- Labour disputes
- Macroeconomic
- Financial crime
- Human Rights Violations
- Climate events
- Health events
- Trade disputes
- Demographics and population change
2. Devil's Advocate/Red Team:
Adan's executive coaches have decades of experience working at the executive level with leading organizations around the world. We have expertise in leadership, productivity, organizational change, team building, marketing, sales and motivation.
Our on-the-job experience coupled with extensive knowledge of the markets and functional areas enables us to deliver a variety of practical, high-impact presentations that engage, enlighten and entertain.
