Impact on Your Business Strategy
These shifts can throw a spanner to the works in markets, supply chains, and even customer demand.
This article will help you, as a business owner, get a bigger picture and understand the impacts of geopolitical risk. Much is out of your control, so we’ll focus on what you can control.
For instance, when trade policies shift or conflict zones emerge, businesses must adapt quickly. Think about the trade tensions with China, or potential sanctions in various regions, which can disrupt supply chains, delay shipments, and cut off access to key markets.
Then there’s US presidential contender Donald J Trump claiming he’ll end the Russia-Ukraine war in a day if re-elected. Pundits say that probably means he’ll pull US military support from Ukraine and force that country to surrender to Russia. Among the pundits is former Australian Ambassador and Federal Attorney General George Brandis. He said on ABC Radio National late last month that such a move may tip this conflict to having global dimensions.
Therefore, geopolitical risks anywhere on the planet could have long-term consequences for your business planning.
Go beyond the headlines with your response. Aim to be prepared for the broader structural shifts that could be heading your way. By staying proactive, you can mitigate risks before they impact your bottom line.
Case Study – ANZ’s Approach
ANZ offers some interesting insights into managing geopolitical risk. They have set up a unit dedicated to monitoring global events and determine how they might affect business operations. Cameron Mitchell, head of geopolitical risk at ANZ, uses detailed data to create risk assessments that the ANZ board then reviews.
Take heed of this proactive approach which allows ANZ to adjust their business strategy in real time. It gives them an edge to deal with issues, including trade tariffs or changes in foreign policy.
Geopolitical Risk in the Broader Business Environment
Boards across sectors, from banking to construction, are facing similar concerns.
For instance, the Australian Security Intelligence Organisation (ASIO) has raised its terror threat alert from ‘possible’ to ‘probable’. It says terrorism and other politically motivated violence are likely to happen with little or no warning. The threat stems not from one particular religion or ideology, but from all spectrums, says ASIO.
Therefore, global shifts in economic power are forcing businesses to rethink their risk management strategies. Whichever sector you operate in, these risks will affect your decision-making and may even determine where you expand, contract or leave certain markets.
Tools to Mitigate Geopolitical Risk
You can stay ahead of these changes. Here’s how.
Begin by developing and refining a robust risk assessment process. Keep an eye on geopolitical developments and work closely with us, as your broker or adviser, to understand how these events could impact your business. Some companies are even employing specialised geopolitical consultants or setting up their own in-house risk management teams to handle these issues.
If your business managed the seismic disruption during and post the pandemic, you have firsthand experience of the risk multiplier effect. It’s worth checking out this concept and embracing it in your risk assessment approach and the strategies you unfurl.
Other strategies to consider are:
- Diversify your suppliers and market spread
- Adopt technology to enhance resilience of and visibility into your supply chains and data analytics
- Explore financial options to help smooth the cash flow gaps that could happen due to supply chain disruption
- Develop a comprehensive plan to minimise the sting of currency fluctuations not in your SME’s favour
- Boost your relationships with suppliers, network with industry (to keep in the know) and
- Add a sustainability layer to your business practices to improve your long-term resilience.
How Insurance Links to Geopolitical Risk
Working with an insurance broker or adviser can help you customise your coverage to address the specific geopolitical risks your business faces. That might be about protecting your supply chain from international disruptions or ensuring you’re covered when there’s political upheaval.
We’ll work with you to understand the regions in which you operate and help build a custom insurance package that ensures you’re protected, no matter what happens on the world stage.
By staying proactive and working closely with your broker or adviser, you’ll be better positioned to manage the complexities of today’s geopolitical risks and safeguard your business for the future.