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How EY can help
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Our Geostrategic Business Group (GBG) can help your business translate geopolitical insights into business strategy to manage political risk. Find out how.
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EY BRETA can help you get a multidimensional overview of threats within your ecosystem, so that you can reduce business risk. Find out how.
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What should these companies do?
Exposed entities should better prepare for geopolitical volatility by revamping their approach to political risk management. They should invest in capabilities across the board, including the ability to identify risks, assess their potential impact and incorporate these assessments into strategic decision-making. EY teams helped an energy company do just that once the senior leadership realized they were overexposed to political risks in a key market. Then EY teams audited their internal political risk management practice to identify and close gaps.
Exposed entities should also explore establishing a geostrategic committee comprised of people from various functions and business units – including operations, finance, government affairs and strategy – to better coordinate political risk management in the future.
Strategy shifts need to be informed by a company’s political risk profile
It’s not revenue size, sector or headquarter location that determines how well companies manage political risk exposure. Rather, a company’s specific political risk profile is determined by the strategic choices that executives make regarding their company’s global business model and political risk management activities.
Executives should not leap to make strategic changes without accounting for their company’s unique political risk profile. Companies need to figure out where they sit on this matrix and the specific political risks to which they are exposed. That positioning will influence many of the opportunities and challenges companies will face as the new era of globalization unfolds.
No matter what political risk profile they have, companies can seize strategic opportunities by rationalizing their political risk profile. Amid an uncertain outlook for globalization, there is increased urgency for companies to align their political risk capabilities with exposure levels – and to incorporate these assessments into corporate strategies to be poised for future growth.