Geopolitical risks must be taken seriously, but there are many CEOs who don’t fully comprehend what these risks are or why they need to fully understand how geopolitical risks could affect their business. If you fail to understand what risks you’re facing when acquiring or merging with a company in a foreign country, hiring an international vendor, or partnering with another company, it can have serious consequences.
You could end up unknowingly breaking sanctions, which can lead to stiff fines from the U.S. government. You could become embroiled in illegal weapon sales, bribery, or blackmail as other companies funnel money through your business. There are so many ways you could damage your company financially or destroy your good reputation without even realizing what’s happening.
To help business owners learn about geopolitical risks, Infortal has created a free e-guide. This guide covers the basics of these types of risks as well as how we can help you mitigate or eliminate them. Read on to learn what the guide covers, then download it to get more in-depth information on geopolitical risks.
Many business executives plan for emergencies and disasters. You likely have a number of disaster recovery plans for everything from a fire in the building to a cyber-terrorism attack. While these plans may be very thorough, they’re still a form of reaction. Reacting means the disaster has already occurred. Your company has already been damaged—now you’re just dealing with the fallout from that event.
Being proactive, on the other hand, prevents the damage from occurring. This is why many companies send their executives to a risk management program or hire a risk manager to assist them in learning what risks they face and how to successfully mitigate them. However, these risk management programs often do not touch on geopolitical risks. This leaves you open to issues such as partnering with a company that uses child labor or acquiring a business that often engaged in bribery.
Geopolitical risks go beyond mergers, acquisitions, and partnerships. Some business owners believe they can ignore geopolitical risks because they’re not directly working with a company from another country. However, with today’s global supply chain, it can be almost impossible to not rely on an international vendor. You may buy components from another U.S. business, but that business may get some of the materials it needs from a company in South America. That company, in turn, could work with Russia, which is currently under sanctions due to its war with Ukraine. You could then get fined for breaking sanctions even though you aren’t directly working with Russia.
Infortal’s full suite of geopolitical risk assessment services will help you avoid these risks. We will assess any business you’re planning to work with, including their history, the state of the region they work in, their key personnel, and their partnerships. Our deep dive due diligence will give you a more complete picture of who it is you’re working with and highlight any risks they may pose.
How can you be proactive in dealing with geopolitical risks? By being educated and aware of what risks are out there. If your risk management program doesn’t cover these risks or your risk management consultant isn’t familiar with them, you need to educate yourself. While geopolitical risks are a type of risk, general training isn’t enough to identify and properly assess them. You need a unique skill set to fully understand how geopolitical risks can affect and damage your business.
Infortal has created a series of courses on geopolitical risk and intelligence solutions. These courses include introductory and master classes taught by experts in the field of geopolitical risk assessment and management. Courses cover areas such as sanctions, regulations, economic espionage, corruption, energy geopolitics, inflation, due diligence investigations, trade secrets, and responsible investing. We go into detail on events such as the war in Ukraine, the current political environment in China, and the future of Europe.
In addition to learning more about geopolitical risks by diving deeper into topics covered in the e-Guide, these courses have been approved as Continuing Legal Education classes by the California State Bar. Those in the legal profession can gain CLE credits while expanding their knowledge and understanding of geopolitical risks.
Partnering with Infortal will ensure that the proper type and level of due diligence is always done, whether you’re looking at a new partnership, entering a new market, or selecting a new vendor. It’s always a risk when you enter a new market, but it’s even more of a risk if you do so without understanding that market. There are a multitude of cultural and social differences that can affect how you should approach a new business venture. Some of these differences can be incredibly subtle, such as the tone or volume of your voice or the specific words you use. One small misstep can lead to the end of a partnership.
Then there are social and cultural events and developments that, while nothing major now, can be an indication that the region’s stability is not as strong as it may seem. Low pay and harsh working conditions often pave the way for labor strikes and riots. Rumors of corruption may be more than just rumors—you may be entering an area where bribery and blackmail are commonplace. In some cases, war can even break out, leading to property damage, loss of employee life, and the disruption of all your business deals in the area. Without fully understanding the conditions of this market, you put yourself at risk of these and many other potential disasters.
Some investigations need to be done at the local or regional level, while others need to be done at the country level. For example, one region may not have many signs of cartel activity, but when you look at the country overall, it becomes clear that drug cartels have a large amount of power over the government. Just because no cartel is currently operating in the region you’re considering doesn’t mean they won’t later or that the region is free of corruption. Local, regional, country-, and even continent-level or global risk assessments need to be done for you to have the full picture of the risks you’re assuming.
You may have done some due diligence into the company you’re looking to acquire, merge with, or partner with, but do you really know how they operate? Do you know if they give bribes to others or accept bribes? Have they had executives embezzle funds or award contracts to companies run by family members or other associates? There are so many ways that companies can perform illegal or morally questionable activities that a basic due diligence report won’t uncover.
Infortal’s deep dive due diligence investigations can find these activities, allowing you to judge how much of a risk you want to take on. In some cases, such as a cover-up involving a single executive who is no longer with the company, you may decide the risk is worth it. In other cases, such as widespread financial misconduct, you may decide it’s not. We believe you should always be able to make such a choice, which means you need to have as much information about the business and its leadership as possible.
We bring our years of experience to work for you in a boots-on-the-ground approach. We do more than simply run a quick search on a business. We dig into financial records, court records, and even the dark web to gather the data you need to understand the risk you’re about to take.
ESG may be a fairly new acronym, but companies have been dealing with social, environmental, and governance issues for decades. Making social or environmental mistakes can lead to fines, loss of reputation, and even lost revenue as customers abandon you for competitors that protect the environment and are dialed in to today’s social issues. However, since ESG profiles are still fairly new, you may not know what your profile looks like. You may also not think to dive into other companyies’ profiles. This can leave you woefully unprepared to make a risk assessment.
If you fail to look at the ESG profile of a company you’re partnering with in China, you may find that it fails to properly compensate its workers or provide them with safe working conditions. This can damage your reputation. Buying a company that does business in Europe may seem very profitable, but if you don’t understand the testing and reporting regulations in the EU, you may quickly be fined for non-compliance. Infortal will help you evaluate your own ESG profile to determine where you can approve while also presenting information on potential acquisitions, mergers, and partners.
To learn more about geopolitical risks, click here to download our free e-guide. You can reach out to Infortal to learn more about how we can help you or to get more information on our geopolitical risk courses.