Geopolitical outlook and risk strategies for the long term
In this interview, Lord Darroch, Former British Ambassador to the United States, and former British Representative to the EU, explores the escalating geopolitical risks impacting global businesses.
He discusses the increase in global conflicts, the erosion of international law, and the rapid spread of information due to 24/7 new cycles and social media. Lord Darroch predicts that these challenges will persist or worsen in the next five years, stressing the importance for businesses to constantly reassess their vulnerabilities and adapt their strategies proactively.
The escalating nature of geopolitical risks
As Lord Darroch points out, the world has become increasingly volatile, arguably more so than at any time in our lifetimes. He highlights that there are currently more conflicts worldwide than since the end of World War II, with the international rules-based system seemingly deteriorating. He cites Russia’s invasion of Ukraine as a notable example of the breaches of international law that are growing more frequent.
He notes the rise of 24/7 news cycles, amplified by social media, which enables the spreading of information – and misinformation –instantaneously. Among the myriad challenges, the unpredictability of political leaders, adds further complexity for risk officers in companies.
The outlook for the next five years
Looking to the future, Lord Darroch expresses a reserved outlook, noting that a widespread emergence of peace is conceivable but unlikely. Instead, current tensions may persist and even worsen. The US-China confrontation, for example, could escalate, and unsettling prospects remain conceivable, such as a potential Russian victory in Ukraine, which could provoke further geopolitical upheaval.
Other factors contributing to sustained market volatility include the AI revolution, which, while promising advancements, is expected to disrupt workplaces fundamentally. Social media, meanwhile, continues to be a dynamic force, unlikely to subside.
Preparing for the uncertain future
In response to these challenges, Lord Darroch emphasises that businesses must be proactive in identifying and addressing vulnerabilities. This involves scrutinising supply chains, overseas investments, business operations, and exposure to global events.
Risk assessment has evolved from an annual review to a continuous, daily imperative. When circumstances change, companies must be prepared to reassess and adjust their strategies and policies promptly. The need for agility and readiness to make radical decisions swiftly is now a core part of corporate survival.
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