Shifting geopolitics and the role of the board

Geopolitically, the world is a dramatically different place from what it was even just five or ten years ago—and many of the changes it has undergone have directly affected the business landscape. Understanding the interplay of certain risks, monitoring international developments and structural shifts, gaming out scenarios, and connecting critical dots requires an astute and focused geopolitical lens.

Boards have a pivotal role to play in assessing how effectively the company is monitoring and managing geopolitical risk, identifying gaps, and strengthening the board’s own geopolitical acumen and risk oversight processes, with the endgame being a robust geopolitical risk governance framework.

Every business will face unique challenges operating in a global environment, but several basic steps can help boost every board’s effectiveness in helping the company navigate geopolitical risk and opportunities more systematically and cohesively.

Three areas of focus are key to assessing the company’s governance structure and processes for managing geopolitical risk:

• Helping to ensure that management has robust processes in place to manage geopolitical risks, including processes to:
  • Identify the key geopolitical risks and their potential impacts on the business.
  • Establish clear responsibility for developing a mitigation plan for each risk to a specific individual and hold those individuals accountable.
  • Provide robust, periodic reporting to the board on the company’s key geopolitical risks—including current risks, future scenarios, and crisis-readiness plans.
• Obtaining a diversity of perspectives, including third-party expert views, regarding the company’s geopolitical risks and management of those risks.
• Considering the board’s own geopolitical acumen and oversight framework.

An enterprisewide approach to monitoring, assessing, and mitigating geopolitical risk is imperative to shift from a reactive stance of crisis management to a proactive, long-term planning approach that can turn geopolitical risk into smart risk-taking and opportunity.