Knowledge@Wharton: “Companies are facing heightened political risks across the globe, but the majority of them are underprepared, reactive, and lacking confidence in their ability to navigate those risks successfully. Geopolitical risks are the biggest, especially with COVID-19 disrupting supply chains, the rise of nationalization and protectionism, the hardening of U.S.-China trade tensions, and increasing confrontations with authoritarian regimes that provoke cycles of sanctions and retaliatory actions. Those are some of the main takeaways from a study released last Friday conducted by the Wharton Political Risk Lab in partnership with its inaugural sponsor, EY-Parthenon’s Geostrategic Business Group. Titled Geostrategy in Practice 2021, the study is the second in an annual series (last year’s report is available here). The study identifies five steps for companies to manage their political risks more proactively and strategically:
- Identify and collect quantitative political risk indicators.
- Develop or acquire the ability to assess the business impact of political risk.
- Integrate political risk into enterprise-wide processes.
- Engage the board and C-suite to incorporate political risk into strategic planning.
- Set up a cross-functional geostrategic committee.
The study was based on a survey of more than a thousand C-level executives, a quarter of whom were CEOs. Half of the respondents represented corporations with more than $5 billion in revenue. Survey respondents were based roughly equally across the Americas; Europe, the Middle East and Africa; and Asia-Pacific. The study covered seven industries – advanced manufacturing and mobility; consumer products; energy and resources; financial services; health sciences and wellness; real estate, hospitality and construction; and technology, media and telecommunications…”