Political volatility demands risk rethink
Geopolitical risks are at the top of the agenda for organisations worldwide, as the world faces increasing political volatility, a panel at FERMA Forum 2024 heard.
With numerous elections taking place this year, the risk landscape is constantly shifting. The panel, consisting of geopolitical risk experts and risk managers, explored how organisations can understand, prepare for, and mitigate these evolving geopolitical risks.
The panel featured Karl-Johan Rodert of Autoliv, Hakan Kayganaci of Yildirim Group, Mia Östervall of HDI Global Specialty, and Andreas von der Heide of Consilio International. They discussed how change, though sometimes slower than expected, is driving the world toward a bi-polar state dominated by the US and China.
Panellists stressed that there needs to be a nuanced understanding of the intricate dynamics shaping the contemporary geopolitical landscape, particularly the interplay between major global players like China, the US, and Russia.
The panel highlighted the transition from the old binary world order of the US and its allies versus the USSR and its allies to the recent scenario where multiple “worlds” co-exist within the competitive arenas between nations like China and the US. This multifaceted reality is underscored by the acknowledgment that these actors do not always align; for instance, the relationship between China and Russia is presented as one filled with ambiguities and fluctuating alliances influenced by external factors, such as Iran’s role in global geopolitics.
“Adherence to ESG principles is not just a compliance requirement but a strategic imperative.”
As geopolitical tensions escalate, especially in the wake of the COVID-19 pandemic and rising global temperatures, the necessity for adaptable and proactive policy responses becomes extremely important.
Panel members also stressed the speed of change in modern politics, pointing out that decisions that once took years to unfold can now develop rapidly due to technological advancements and changing socio-economic conditions. Companies and nations now need to anticipate movements in geopolitical currents more quickly than ever, learning from past disruptions and building agility into their strategic plans.
Moreover, the interplay of various global crises, including climate change, economic instability, and civil unrest, is shaping public perception and government action. The panel noted that political violence, trade conflicts, and regulatory changes pose significant risks to businesses and nations. As a result, understanding these risks is becoming crucial. This necessitates a shift in thinking from reactive strategies to proactive risk management frameworks, with leaders embracing flexibility and scenario planning to prepare for a range of potential futures.
In addressing the future landscape, the panel speculated about a world increasingly marked by protectionism and fragmented trade relationships. They emphasised the significance of recognising national interests and values in global trade as countries seek to realign and fortify their economic standings.
As the previous reliance on a unipolar system is fading, and new trade relationships, characterised by regional cooperation and shared interests, are taking shape, the vital role of ESG criteria is emerging.
The panel stressed that adherence to ESG principles is not just a compliance requirement but a strategic imperative. Incorporating ESG practices can help companies mitigate risks related to environmental degradation and social unrest, enhancing their resilience in an unpredictable world.