Council Post: Mitigating Geopolitical Risks For Your Global Team

Jacob is a dreamer, visionary, strategist and the president and CEO of Flatworld Solutions Inc., an outsourcing services provider.

We are now global villagers, living beyond geographies, thanks to the virtual world in the cloud. Businesses are compelled to face the risk of the unknown, uncertain and unpredictable events transpiring all over the world. Although technology has expanded the scope of business, it has brought with it challenges of operating under diverse political scenarios, each breeding its own perils, putting the very core of the business — its economics — at stake. Unstable governments, terrorism, pandemics, power shifts, wars and many other unpredictable events can have severe consequences for global businesses.

Situations like the Covid-19 pandemic, the Syrian war and Brexit, to name a few, can lead to recessions and major job cuts. They can also create tensions for global enterprises.

In my experience leading a global company, I’ve seen the positive and negative impacts political events can have on the business. Over time, my company has developed a way to approach these potential impacts. Knowing risks can never be fully eliminated, we focused on mitigation. To do this, we divide the risk into macro and micro using a simple rule: Measure company assets’ exposure to risk.

• Macro risks can generally be identified when a country has major power shifts, a civil war, an epidemic, etc.

• Micro risks are situations where only certain industries and interdependent trades are affected and can easily be predicted or mitigated.

Six Common Risk Zones For Global Businesses

1. Operations in emerging or unstable markets: Risks of terrorist attacks, civil wars, religious unrest, expropriation, etc., can be higher due to the physical and geographical locations of organizations.

2. Employee migration and overseas travel: Threats to workforce safety may arise due to work-related migration or travel to risk-prone markets.

3. Centralized organizations: In the centralized authority approach of global businesses, corporate decisions come from a centrally located headquarters, and other regional leaders may have little say in the overall business strategy. This creates a challenge when mitigating regional risks because decision making is delayed by a centralized corporate brain that is removed from the regional environment.

4. Supply chain operations: Giant enterprises with global supply chain networks as their foundation can lose more than just enormous amounts of money due to unpredictable geopolitical events.

5. Capital losses: Inordinate changes in the country’s laws and regulations, or major political disruption, can cause loss of capital inflow for certain industries.

6. Cyberattack or data vulnerability: Compromised cybersecurity and data confidentiality are the biggest 21st-century risks, plaguing every online business and putting industries at risk.

What Can Global Businesses Do To Mitigate These Geopolitical Risks?

Insurance

It’s a no-brainer that you have to keep your business insured at all times. However, the biggest mistake most companies make is to buy inadequate insurance. Understand the nature of your business. Evaluate your assets, and take expert advice about investing in insurance that covers all your potential risks for an adequate amount of time.

Dispersing Critical Assets

Having all your actions focused in one direction is like skating on thin ice: If you break through, there’s nothing there to catch you. Creating contingency supply chain networks and vendors, building buffers, and apportioning the crucial assets of the company must all be done in a timely manner to tackle adverse situations that arise due to any geopolitical unrest. In short, always have a plan B.

Intelligence Gathering Systems And Warning Mechanisms

Global businesses need to develop an intelligent and proactive approach toward risk management. Apart from artificial intelligence and machine learning, vigilant project leaders play a crucial role in anticipating issues before they happen and sending warning signals to leadership so they can take preventive measures. There is also an urgent need to establish automated response systems guided by stringent protocols to reduce the time gap in the execution of course of action, thus allowing enough time for implementation of strategic decisions.

Politically Savvy Banking

With global reserve currency experiencing major fluctuations in recent years, it has become crucial for businesses to integrate better banking strategies to direct their flow of funds. Conducting extensive research to find the best banking strategy in each country where you operate is imperative to viably manage your cash flows and currency conversions on a daily basis.

Strong Communication Channels In Case Of Adversity

In case of a terrorist attack or a pandemic near your operational facility and a shutdown of all channels of communication, how would your employees reach for help? In the dynamic and highly unstable surroundings of the complex world that we are living in today, you need to raise such questions beforehand and establish systems to resolve communication. You need to have durable and secured communication systems such as radio transmitters or automated warning signals to quickly report any problem and tackle it as efficiently as possible.

Take Advice From Local Experts

The business must seek and rely on the experiences of industry insiders, local experts and other relevant advisory councils to assess the region-specific political situation. Strategies that take these regional experts’ opinions and advice into consideration will have a better chance of success than strategies set by centralized management without the guidance of anyone in the relevant territory.

Outsourcing To Reliable Vendors

Lastly, a major contributor to the significant reduction of geological impact on businesses is the vendors you hire in different regions to carry out your tasks. As an outsourcing partner myself, I believe outsourcing your business operations to trustworthy, dynamic and agile vendors in the region can help you successfully mitigate the many geopolitical risks. When it comes to choosing your offshore partners, do your research, and always rely on partners that have a global presence, strong infrastructure and a well-linked network.

It is crystal clear that no one can predict what the future holds for businesses. However, careful and strategic planning can prepare you for the unknown. The biggest step in preparing yourself is to have imagination guided by continuous learning. While artificial intelligence and predictive modeling can be your guide to identify any new trends or deviations, top management must be observant, alert and proactive in its approach to be able to withstand changing global conditions.

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