Geopolitical risks can no longer be an afterthought for companies, according to one analyst.
Tom Inchley, UK research analyst for ISS Governance, said these days firms are under more scrutiny from institutional investors to manage risks.
He believes the threat of geopolitical risk has overtaken climate and cyber security risks, as well as supply chain protection, as the most pressing issue for boards and investors.
“For many companies worldwide, the global volatility is especially alarming, given how integrated global trade, finance and supply chains have become over the past few decades,” said Inchley.
“Moreover, for businesses that operate internationally it has become exponentially more difficult for them to avoid economic fallout from conflict hotspots.”
Inchley went on to say that while many businesses have faced the risks of geopolitical instability in the past, businesses working across different countries has made this more complex.
He added: “Some companies would likely benefit from geopolitical expertise beyond what they have required in the past to ensure that they can chart a careful path and help avoid any major pitfalls.
“Beyond ensuring that their boards have the relevant skills, and that geopolitical risk is considered carefully and not as an afterthought, many companies will likely have to ensure that geopolitics is analysed throughout all levels of their risk management structures and processes.
“Risk assessments will also need to be kept up to date in order to ensure that they reflect the ever-changing geopolitical environment.”
In November 2023, Blackrock told the FT “geopolitical fragmentation”, along with ageing populations and costs linked to the energy transition would push up long-term interest rates.
tara.o'connor@ft.com
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