Geopolitical risk is now a key focus for businesses of all sizes, including SMEs.
Conflicts like the Gaza conflict, far-right violence in the UK, the Russia-Ukraine War, and rising tensions between the US and China are reshaping the global landscape. EY has even called 2024 a “geopolitical multiverse,” with complex alliances and rivalries at play.
So, what does this mean for your business?
Impact on Your Business Strategy
Geopolitical shifts can disrupt markets, supply chains, and customer demand, forcing businesses to adapt quickly.
While much of this is beyond your control, you can take steps to prepare. For example, changes in trade policies or emerging conflicts—like tensions with China or the Russia-Ukraine war—can impact supply chains, delay shipments, and block access to key markets.
With political figures like Donald Trump claiming he could end the Russia-Ukraine war if re-elected, global conflicts could escalate, affecting businesses worldwide.
Case Study: ANZ’s Approach to Geopolitical Risk
ANZ provides valuable insights into managing geopolitical risk. The bank has established a dedicated unit focused on monitoring global events and assessing their impact on business operations. Cameron Mitchell, ANZ’s head of geopolitical risk, uses detailed data to create risk assessments, which are then reviewed by the ANZ board.
This proactive approach allows ANZ to adjust its strategy in real-time, giving them an edge in navigating challenges like trade tariffs or shifts in foreign policy. It’s a model for businesses to stay agile and responsive in the face of geopolitical uncertainty.
Geopolitical Risk in the Broader Business Environment
Boards across industries, from banking to construction, are facing similar geopolitical risks. The Australian Security Intelligence Organisation (ASIO) recently raised its terror threat level from ‘possible’ to ‘probable,’ highlighting the increasing risk of terrorism and politically motivated violence.
Shifting global economic power is pushing businesses to rethink their risk management strategies. These risks impact decision-making and may even influence market expansion or contraction.
Mitigating Geopolitical Risk
To stay ahead, develop a robust risk assessment process and monitor geopolitical developments. Work with your broker or adviser to understand how these events may impact your business. Some companies are also hiring specialized geopolitical consultants or creating in-house risk teams.
If you navigated the disruption caused by the pandemic, you already understand the power of risk management. Consider applying this experience to refine your approach moving forward.
How Insurance Links to Geopolitical Risk
An insurance broker can help you tailor coverage to address specific geopolitical risks, such as supply chain disruptions or political upheaval. We’ll assess your business’s global operations and create a custom package to protect you from international challenges.
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