“The world is much more uncertain and volatile than it has ever been before. And that is because of some factors coming together now that have never come together before. And they amplify each other. You have a totally different world order and we struggle with that enormously” Paul Polman, CEO, Unilever – comments made in interviews for “Thinking the Unthinkable; A New Imperative for Leadership in the Digital Age”
Intelligence professionals need to be fundamentally forward looking in how we approach our roles as guardians of our organization’s resilience – especially as it relates to major external shocks. With potentially disruptive US elections approaching and a host of hot button geopolitical issues on the table – the economy and global security environment are ripe for shocks. Excepting political risk created by the elections, most of these issues exist without the US Presidential elections as a factor. What makes them especially worthy of our attention right now is their potential to catalyze actors to provocative actions with intent to influence outcomes, capitalize on US distraction with domestic politics, or intimidate allies and other foreign actors. All of these may increase political and security risk for multi-national organizations as foreign governments react to or seek to hedge their risk based on candidate’s foreign policy and trade platforms.
While it can be hard (and politically touchy) to train leadership attention on strategic impacts of these hot button issues, prepping decision makers for possible shocks and discussing mitigation measures in the event of a major unanticipated event is a key reason our roles exist. This is an opportunity for risk intelligence to add real value and depth to their organization’s risk management capacity.
With that in mind, here are just a few of the issues we’re addressing with our clients as the fall approaches:
Political risk from US elections impacting US multi-nationals overseas
For the first time in decades, political scientists and financial markets anticipate substantial political risk associated with the upcoming US elections. For multi-national organizations, the risk associated with foreign government perception, potential sharp changes in US foreign policy, and foreign reaction to perceived risk to their interests is sizable. From the impact on defense and trade agreements to increasingly punitive regulatory environments to increased anti-American sentiment, it’s important to consider which way the winds are blowing and begin thinking about ways to mitigate these risks in this increasingly unpredictable election year.
Simmering geopolitical challenges
Last week China announced it would deploy its first nuclear submarine days after the US announced it was lifting a decades old arms embargo on Vietnam. In a climate of continual small escalations in the South China Sea, this was not as alarming as perhaps it should’ve been. Meanwhile, North Korea continues with bellicose rhetoric and aggressive weapons technology development. Russia’s unpredictable foreign policy may also worsen in response to the US missile shield in Europe or in the likely event that sanctions are extended in July. Further agitations designed to provoke response from Presidential candidates shift the general tenor of the election, or in anticipation of a muted response from a distracted US political establishment should be anticipated on at least one of these fronts. While these are high level geopolitical issues, all of them have real world impacts for the security, political and regulatory environment for US companies operating abroad.
Global economic shocks
The 2008 financial crisis completely changed the trajectory of the political conversation ahead of the 2008 election and shifted the fortunes of millions of people around the world. As the US elections approach, increasingly erratic US and overseas markets may be the norm, depending on who is polling ahead in the race, whose voice is being heard the loudest and how that bodes for economic growth at home and abroad. With respect to Chinese markets, no matter how we dice it, enormous amounts of the global economy – and as an extension global risk – are wrapped up in a market that is anything but transparent. Election season could exacerbate this risk OR a market collapse could impact the outcome of the elections. While the question of how a collapse in the Chinese market would reverberate is an overwhelming one, we need to seriously consider US business resilience to such an event.
Terrorism, extremism, and technology enabled catastrophic events
As has occurred in the past, interest in pulling off major coordinated attacks ahead of elections is likely to rise within extremist organizations possibly with intent to influence the outcome. While the nature of terror attacks makes it hard to plan for, it is worth the time to assess organizational readiness and resilience to catastrophic attacks in the coming months. Particular attention should be paid to large events – especially technology enabled events – that would cause disruptions to critical infrastructure such as electricity, water, food supply, or major logistical hubs. A chaotic election year offers a potentially irresistible stage for those who wish to do catastrophic damage and disrupt major economies.
Its not what you know, it’s how you analyze it
Our approach to these problems – because they so dramatically impact the analytic outcome – is as important as analyzing the issues themselves. Here are a few thoughts on ways to approach what may be a very touchy political topic within your organization.
(1) Choose the most relevant issues
A critical examination of strategic issues that may impact your organization shouldn’t be an individual scattershot exercise, nor should it be based on gut instinct. Take a systematic approach to the risks that are most relevant to your short and medium term business model with other company professionals with complimentary roles. It may be helpful to draw up a list of company relevant issues and actors that are sensitive to major changes in the US electoral environment – including countries that have already weighed in on US elections, extremist actors looking for a high profile stage or with definable interest in seeing one candidate win over the other, or actors with sizable economic interest at stake.
(2) Introduce issues gradually
Rather than writing a paper on potential shocks with no previous introduction to the issue, start sensitizing potential strategic issues slowly through other mediums first. A daily or weekly product is a great place to start introducing issues of concern and to briefly highlight potential risks for the organization. Another method is through one on one discussion with others who may have an overlapping area of responsibility and a different point of view on the subject. Depending on your organization’s receptiveness, you could also conduct an internal poll on how people in your company view risk associated with these issues – gauging both awareness and internal concern.
(3) Consider your bias
Consider the organization’s and your own bias about potential outcomes and look for ways to correct for it. On election-related issues, our biggest blind spot may boil down to our inability to be objective about the candidate field. Beyond personal feelings about the candidates, US-based risk intelligence analysts are often not used to looking at political risk and geopolitical risk associated with US politics. As a result, our bias may be higher and analysis more inclined to downplaying potential outcomes than it might be if we were looking at a similar issue in another country. The first step is to be aware of it and willing to challenge your own assumptions. Then, there are many ways to help us reduce bias, including (shameless plug alert!) some that we will be working through at our July mini-training.
(4) Make sure you’re asking the right question
Too often companies approach geopolitical issues with the immediate impact in mind and if they don’t discern a direct impact, they move on. But there are serious business continuity disruptions and consequences that may not be immediately apparent with the application of the simple question: How does this impact us? In Asia for example, secondary and tertiary supply chain risks are acute with so many companies’ supply chains inextricably tied to the region. So what is the right question? Is it: How would a Chinese economic crash impact our company? Or is it rather something else, like: How resilient is our supply chain to a major economic crash in China and beyond? Or: How many single source suppliers do we have in this region and what are the major shocks we need to be thinking about that could impact our business resilience here?
Keep your mind in a strategic place
Businesses are so busy doing their business, that, without leaders who are intentional about examining strategic risks, many of these issues go unnoticed until mitigation is no longer an option. Thought leadership on strategic shocks is a perfect role for risk intelligence professionals. Regardless of other curve balls this election season throws us, it will pay dividends to get ahead of the issues. Now is the time. Our ability to add value through intelligence and analysis will decline as the elections near and the opportunity for building resilience and mitigation strategy disappears altogether.