How to use geostrategic intelligence to protect your business from geopolitical instability

The sources of geopolitical instability and threats to business are now more diverse and widespread than even just five years ago.

This more complex risk landscape has led to a surge in demand for geostrategic intelligence – analysis of the multiple security, political, economic and technological challenges and the way they can impact each other.

Yet the nature of the demand is also changing. Threats now emerge much faster and with less warning, necessitating modifications to the way geostrategic intelligence is produced and used.

Companies today face multiple disruptive threats across their global operations and supply chains. Moreover, they are occurring with greater frequency and often with fewer pathways to near-term resolution.

These threats range from regional conflicts to state-sponsored cyberattacks, from tariff-raising trade policies to attacks on shipping, and from Islamist insurgencies to military coups and country-paralysing civil unrest.

Many can also lead to new policies and regulations that affect the viability of commercial activity.

Rethinking geostrategic intelligence

These new realities are forcing risk owners and managers in multinationals, and indeed geopolitical risk consultancies, to rethink their approach to geostrategic intelligence.

One of the main conundrums is how to maintain and balance effective situational awareness and anticipation without becoming consumed by frequent near-term challenges.

The coronavirus pandemic and its repercussions accelerated widely predicted long-term shifts in geopolitical risks. This took us into a geostrategic landscape of multiple, rapidly emerging threats much sooner than many organisations may have expected or been ready for.

“The relative predictability of the post-Cold War era is firmly over”

This new reality is shaped by more intense interstate competition, new and changing regional power balances, the rise and spread of authoritarian governance, the weakening of the rules-based liberal order and its institutions, and weakened and disrupted societies and economies.

In short, the relative predictability of the post-Cold War era is firmly over. And businesses traditionally slow to perceive geopolitical risks as relevant to them, now need to be ready to manage frequent, and often immediate material threats.

The conflicts in the Ukraine and Gaza are illustrative of the new paradigm, and how global businesses are adapting to it.

We know that many business leaders and investors were sceptical that Russia would actually invade Ukraine and were unprepared for it, despite warnings of the threat from the US and UK governments and geopolitical intelligence businesses.

”The situation in the wider Middle East remains highly unstable with few clear avenues for tensions to cool.”

That conflict resulted in a measurable surge in demand for geopolitical risk analysis by stakeholders in large multinationals and external advisors. That demand has remained, with an acceptance that the new norm is what some now call the polycrisis era.

We have already seen the effect of this change in requirements and risk perception with the war in Gaza, whose outbreak prompted many businesses to immediately prepare for a wider conflict fallout. And, indeed, that anticipated fallout soon followed.

This has so far included major disruption to Red Sea shipping and Iran launching over 300 missiles and drones at Israel in April, in response to the bombing of its embassy in Damascus. That led to airspace closures among other impacts.

The situation in the wider Middle East remains highly unstable with few clear avenues for tensions to cool.

Growing volatility presents operational challenges

The new instability has significant operational implications for international businesses, which in turn impact strategy. As companies race to respond to rapidly unfolding events, they face a welter of urgent and costly decisions.

These may include the emergency evacuation of staff, serious disruption to local and regional supply chains, physical and non-physical (expropriation) threats to assets, and the reputational risks of retaining a presence in a country where human rights and political abuses are taking place.

Such challenges drive other implications, such as higher insurance costs and the need to rethink strategy and risk tolerances.

The pace at which political and security crises now develop and their multiple impacts requires a rethink of what constitutes effective intelligence advice on geopolitics, particularly as it pertains to the geostrategic risks of conflict and insecurity.

“Finding a way to stay off the back foot is critical when volatility is the norm.”

Longer-term and periodic geostrategic intelligence assessment and forecasting is no longer solely adequate to protect multinationals’ interests. But, at the same time, there is also a risk that near-term threat assessment and mitigation may eclipse the importance of longer-term analysis.

This requires striking a balance between planning around five-to-ten-year timeframes while simultaneously and rapidly analysing the directions and strategic implications of emerging risks.

The latter is particularly important because there is some evidence that companies have become preoccupied with reacting to alarming news headlines about developments without fully evaluating how much of a threat or risk they actually pose, both in the near and long term.

Finding a way to stay off the back foot is critical when volatility is the norm.

Reorganising risk assessment

For effective anticipation and responses to near-term as well as long term threats, boards need to have a company-wide approach to risk assessment and actions.

This should involve multiple stakeholders and ideally a central multidisciplinary risk function that is able to holistically analyse the geostrategic, security, economic and political intelligence provided by in-company experts and/or external suppliers.

A multi-disciplinary and de-siloed approach can ensure adequate agility and thoroughness in assessing the impacts of risks relevant to all elements of a business from operations to strategy.

Central to such activity is specialist scenario analysis that reduces surprise and enables stakeholders to better anticipate events and understand their significance as and when they emerge.

“Boards need to have a company-wide approach to risk assessment and actions.”

Scenario analysis, when done well, reduces uncertainty and offers an intelligence- and data-led approach to effective strategy, planning and decision-making. It enables organisations to deal directly with the challenges they are likely to face, in good time and with less anxiety and decision risk.

Yet in setting up to better anticipate near-term risks of material impact, companies must not lose sight of the need to analyse events and trends likely to cause problems further down the line.

The latter are critical to understanding the former and vice versa, and with it an understanding that strategic risks and operating risks are becoming ever more entwined in cause and effect and often with far greater frequency than decision-makers may be accustomed to.

So, a balance must be struck. Geostrategic intelligence should remain key to board-level strategic planning, but a structure should also be in place for it to help navigate sudden crises. And in all cases, organisations must make clear to their intelligence advisors, be they internal or external, what their new requirements and processes are.

They then need to work with them to ensure as seamless and sustainable a process as possible, linking actionable insight to effective decision-making for risk owners across the enterprise. In our volatile, multi-polar world, this two-tier approach will become increasingly critical to business resilience and finding ways forward to deliver growth.