Over the past month I have delivered presentations or joined discussions on the intersection of geopolitics and supply chain, third party risk management, cyber security, and the international maritime insurance industry. In addition, I have presented or discussed topics ranging from RANE’s 10-year forecast to U.S.-China relations, Greenland in a North American context to changing concepts of strategic deterrence. It has been a full month of geopolitical engagement, from the tactical to operational to strategic, in several different cities and on two continents. As I wait for the flight home, I have a few observations to share from this round of travel.
1. Geopolitics is a hot topic across industries, academia, and government, but there is little agreement about just what “geopolitics” is, much less what constitutes "geopolitical risk.” This is not a new phenomenon, and even academia presents a very wide range of definitions for the term geopolitics. This ambiguity creates challenges for businesses seeking to manage geopolitical risks, because the recognition and implication of geopolitical risk may be seen differently from different business units, and those more direct impacts may have other pre-existing risk frameworks - from corporate security to supply chain resilience to regulatory and government affairs. Given the connected natures of risk in a world of high volatility, it may be beneficial to consider geopolitical analysis as a framework to better understand the interconnectedness of risk, drawing on its synthetic approach to see how all the factors interact. This is particularly relevant as the world returns to a more multipolar framework, with a diverse and flexible set of global interactions, regulations, and competition amid rapidly shifting social norms and technological advances.
2. What is discussed locally or in small rooms does not always align to what local and international media (or even social media) highlights. Identifying leading indicators of social and political change requires going beyond what is written to engaging with people of different socio-economic status, different levels of “access,” different regional and technical connections. Although social media monitoring is a valuable tool, it may lag or fail to recognize local shifts in perceptions and priorities - changes that can ultimately ripple out across countries. At the same time, over reliance on a few “well placed” sources can lead to a trap of bias and a closed loop of information. Balancing awareness through “external” sources, such as traditional and social media, academia, and government relations, with “internal” sources through social engagement, dialogue, and observation can provide a more holistic understanding, and tease out earlier indicators of change.
3. Scenarios are a critical part of anticipating and managing the future, but many scenario building exercises default to likely, best, and worst cases, and thus fail to explore the plausible futures that are not at the extremes of corporate preferences. Everyone talks about building out scenarios as one of the primary tools to manage geopolitical risk, but these are often narrowly focused on how the company sees the world and their specific interests, and thus miss second and third order implications from broader regional and global shifts. Rather than beginning with the company viewpoint, it may be beneficial to periodically begin from an outside-in perspective, looking at the regional or global system independent of the corporation initially, and mapping out plausible future scenarios that are agnostic to corporate interests. Once this is done, then look at those worlds to determine what it would mean for the company, for its various business functions, and assess the tactical, operational, and strategic impacts, risks, opportunities, and potential strategies. Drawing on internal and external expertise can facilitate this process.
A geopolitical approach to risk looks at the broad patterns, and then brings them down to the more direct application to a company or organization. It draws on a variety of inputs, providing different weights to drivers depending upon the scale and scope of the assessment and to the specific conditions being explored. It is initially agnostic to the corporate or organizational interests, but only insofar as the analysis seeks to understand the structure of the world, region, or set of relationships that frame the playing field within which the industry operates. With that framework, the corporate relations, supply chains, interests, and challenges can be mapped against the broader global patterns to discern areas of friction, but also areas of unseen opportunity. By creating frameworks grounded in geography and history, drawing on a variety of inputs from economics and politics to social and technological dynamics, geopolitical analysis helps organizations see risk and opportunity in a more holistic light, can shine a light on changing global patterns that impact commerce, investment, and information flows, and can help organizations anticipate the future.
