Ep. 205: Derek Leatherdale: On Demystifying Geopolitical Risk
Nov 23, 2023
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Derek Leatherdale, geopolitical risk expert, discusses navigating global complexities and decision-making for businesses. He shares insights on managing geopolitical risks, the impact of global events on organizations, and strategies for proactive risk management. The conversation delves into how organizations can effectively assess and mitigate geopolitical risks, address internal coordination challenges, and ways individuals can enter the field of geopolitical risk management.
Geopolitical risk integration in decision-making is crucial for organizations to navigate uncertainty effectively.
Geopolitical risk should be viewed as a continuous trend, not isolated events, requiring coordinated risk management efforts.
Organizations, regardless of size, can benefit from prioritizing and addressing geopolitical risks through strategic assessment and resource allocation.
Deep dives
The Evolution of Geopolitics in Corporate Conversations
Corporate audiences have shown interest in discussing abstract geopolitics, with boards often inviting former ambassadors or political figures to speak on global issues. This started as 'agenda entertainment' and transitioned to 'agenda attainment,' revealing a shift towards actively addressing geopolitical risks. Organizations underestimated the value of integrating geopolitical risk into decision-making processes, highlighting the need for a structured approach to understanding and responding to such risks.
Challenges in Geopolitical Risk Management
Geopolitical risk, impacting business models through changes in international relationships, poses challenges in measurement and assessment due to its nonlinear nature. Firms often rely on external political risk data but benefit from overlaying qualitative expert judgment to validate numerical scores. Viewing geopolitical risk as a trend rather than isolated events helps organizations anticipate and mitigate risks, necessitating coordination among internal teams to form a comprehensive risk management framework.
Prioritizing Geopolitical Risks and Building Internal Expertise
Organizations can prioritize relevant geopolitical risks by conducting impact assessments to allocate resources effectively. Addressing misconceptions, such as the belief that geopolitical risk only affects emerging markets, requires a strategic approach to understanding and managing risks across various regions. Developing internal expertise or leveraging external support helps organizations navigate complex geopolitical landscapes and make informed decisions amidst increasing global volatility.
Impact of Geopolitical Risk on Different Teams within Organizations
Different teams within organizations often deal with distinct elements of geopolitical risk impact, such as legal entity structures, compliance, supply chain impact, and outsourcing of critical services. Each team may have varying levels of expertise and perceptions of risk, presenting a structural challenge in addressing geopolitical risk. To effectively manage this, it is crucial for the entity responsible for the framework to have access to authoritative insights on geopolitical risk dynamics, either through internal capacity or external expertise.
Navigating Geopolitical Risk for Smaller Organizations
Smaller organizations with international footprints or dependencies on global supplies, albeit limited resources, can allocate responsibility to lead on geopolitical risk analysis. Prioritizing which geopolitical issues are critical for the organization enables a focused approach. While it may not be feasible for smaller entities to establish dedicated geopolitical risk teams, having a lead person or team to discern impactful risk factors and engage selectively with external suppliers for expertise proves beneficial. Taking action and planning for potential impacts, even with uncertainties, is emphasized over inaction in addressing geopolitical risks.
Today, we talk geopolitical risk, an area that, if recent surveys are to be believed, keeps CEOs up at night more than anything else. My guest is Derek Leatherdale. Derek is the founder and managing director of GRI Strategies, which helps companies thrive in a volatile world. He does that by helping them think through and respond to geopolitical risk.
Prior to that, Derek set up and ran the Geopolitical Risk Function at HSBC, helping integrate expert geopolitical risk insight into the way in which the bank manages risk. And prior to that, Derek worked in national security and intelligence roles for the UK government. He works with boards and senior leaders on issues related to geopolitics.
This one is a great conversation, not just because we talk about a fascinating area of risk, but also because it provides insights into the complexities of decision-making at large organisations. And even if you don't work in a large corporate, I think you'll find this one very interesting. The world is indeed complex and uncertain and getting more so, and it's interesting to consider how to make sense of that complexity and to make practical decisions around it, and I think that Derek's insights help us do that.
