Managing legal risk in uncertain times is a priority for many major companies today. From Eastern Europe to the Middle East, from the Indo-Pacific to Sub-Saharan Africa, the proliferation and diversity of geopolitical flashpoints—and their complex, often unpredictable, interactions—make today’s business environment fiendishly difficult to navigate.
The World Economic Forum’s 2023 global risk report discusses the need for preparedness to increase resilience against multifaceted and connected risks. It includes a scenario plan for a potential “polycrisis” in the mid-term, which it defines as “a series of disparate crises that interact in such a way that the overall impact far exceeds the impact of each crisis individually.”
Armed conflict and great power geo-economic competition are compounded by climate and natural resource emergencies, each contributing to the disruption of supply chains, cost of living, and societal health. From attacks on commercial shipping vessels to global competitive systemic tensions, businesses and governments vary in their ability to monitor, prepare for, and withstand these emerging risks.
The Covid-19 pandemic, with its widespread impact on health and well-being, value chains, economic markets, and geopolitical dynamics, is an example of the need for a dynamic and evolving approach to resilience.
Several major multinationals have instituted geopolitical risk scanning into their in-house legal and compliance departments to provide risk analysis and contextual support for strategic decision-making. Many are augmented by third-party expertise. The best geopolitical risk analysts will deliver analysis that is actionable, proactive, unbiased, and comprehensive:
Actionable. To act on geopolitical risk analysis, you need to know what’s unique about your business and critical to its success. What do you produce? Who are your customers? What is your geographic reach? Next, forecast the likely impact of global, regional, or local trends and their likely tactical manifestations on each of these areas.
The more focused, the better. Big-picture geopolitical reports alone aren’t likely to generate the level of detail needed by an automotive manufacturer or fast-fashion brand, but zooming in on your industry, products, or geographic reach can translate into targeted recommendations. You may have to make short-term sacrifices, such as passing on an acquisition or contract, to protect your business from geopolitical threats.
Proactive. Translating geopolitical risk assessment into practical decisions—such as whether to open a factory in a specific region or partner with a certain international partner—requires ongoing, proactive situational monitoring. Geopolitical advice should be presented regularly and frequently, always considering the full picture of the client’s geopolitical exposure and needs.
Unbiased. Humans are complex and imperfect, so it’s nearly impossible to eradicate bias. But methodological safeguards can bolster objectivity.
Quantitative data and rigorously vetted sources are the foundations of accurate analysis. And with disinformation, digital and social media, and self-fulfilling prophecies as major factors on the geopolitical stage, the ability to account for events as well as perception is crucial to produce reliable forecasts and sound recommendations.
Comprehensive. Geopolitical trends and events can affect many aspects of your business, from market strategy and international expansion planning to reputation and data protection. To understand all the angles, you need expertise in a range of specialist areas, including legal, tax, and regulatory compliance.
The international stage has always been ripe with uncertainty, and simplicity isn’t exactly in the forecast. If global events evolve into a polycrisis, it will reverberate through countries, economies, and business sectors for years. A thoughtful, integrated approach to geopolitical risk advice seems more important than ever.
Now is the time for in-house legal departments to gear up, listen up, and incorporate geopolitical factors into all levels of corporate risk planning and strategy.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Beniamino Irdi is head of strategic and international affairs at Deloitte Legal.
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