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Many boards treat geopolitics as background noise, leaving their companies exposed to unnecessary risk. Smart boards take a different approach, closing the gap and treating geopolitical risk with the same rigour as financial, cyber, and regulatory risks.
In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner, is joined by Colin Reed. Colin is the Chief Intelligence Officer of Clock&Cloud, a software start-up transforming how large enterprises manage geopolitical risk. Previously, Colin built Salesforce’s first-ever geopolitical risk management function, and before that, he was a senior intelligence analyst with the U.S. government. He has advised organisations of all types on how to translate geopolitical complexity into actionable insight. He brings a practitioner’s perspective on how boards and leadership teams can get ahead of their competitors by better managing risk and opportunity in our turbulent world.
“Most of the business leaders we have today have had their entire careers in an unusual period of history.“
As Colin looks across history, he notes that the post-Cold War period was an unusually stable business climate. This led boards and C-suites to treat geopolitics as something governments must manage rather than their own business priority. However, as history reverts to its tumultuous norms, corporations must step back into taking an active approach to geopolitical risks.
“There’s nothing unavoidable about geopolitical risk. It very often telegraphs its approach.”
Colin feels boards needn’t be surprised by geopolitical risk. Thanks to modern systems, it is easier than ever to model how risks can impact operations and the bottom line. Boards have learned to map and mitigate financial and cyber risks. They can learn to do the same with geopolitics, especially now that the tools exist to model even very complex situations quantitatively.
“To me, geopolitics is akin to the weather. It never goes away, and try as you might, you’ll eventually have to go outside in it.”
The best practices right now for closing the geopolitical risk gap are to stop treating geopolitics as ‘Act of God’ surprises and instead build a robust risk management framework around it. While there are many nuances to geopolitics, there are not so many that they can’t be mapped and modelled with the latest tools. Ideally, this is handled at the strategy level and should be forward-looking rather than backwards-looking or reactive.
“I don’t think it’s sufficient to rely on a single board member, or an external advisor, to manage this problem, because doing so builds a single point of failure into the system.”
Colin feels that boards of large companies do best when they internalise the understanding that everyone must be aware of the need to track and manage geopolitical risk. This is especially true for European boards, which face risks from more angles than American boards in the present environment. Identifying a C-suite-level champion for geopolitical risk to build alignment across operations and identify gaps, and then investing strategically in solutions, is a cost-effective approach to building resilience. Plus, with the new tools available, there is more that firms can do to close their gaps and mitigate known risks than ever before.
The three top takeaways from our conversation are:
- Geopolitics can be understood and managed, and the expertise to do so already exists if you know where to look inside and outside your organisation.
- Proactive engagement on geopolitics isn’t new. What’s happening now is a return to historical norms.
- Quantitative metrics and modelling systems are about to revolutionise this field.
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