02 Apr

The CEO as Chief Geopolitical Officer (report published by KPMG)

The professional services firm KPMG, has just published the report “The CEO as Chief Geopolitical Officer”, about the rol that this figure must accomplish in the new world scenery. According to the report, today’s geopolitical environment is nothing like what we’ve seen in the past. CEOs are beholden to the outputs of an increasingly complex geopolitical system that moves at an accelerated pace, with few guardrails. Outcomes are hard to predict without careful focus. Time to react is limited. Only by moving politics to the forefront of strategy, and personally being the point man/woman for geopolitics can a CEO lead their organization to success in turbulent times.

The report reasons that only by moving politics to the forefront of strategy can a CEO adequately steer today’s global businesses. Such thinking starts with an acceptance that global companies are assumed political entities and CEOs de-facto political players. It means recognizing that a different approach is required, one that elevates politics in

the boardroom and puts it on a par with other strategic challenges.

Furthermore it requires CEOs to personally play the role of Chief Geopolitical Officer (CGO), using specialized insights and stresstesting tools to focus the company’s attention on managing an increasingly uncertain environment.

New standards

Corporate leaders are looked to for social media comments and responses to political events almost in real time. In a world without social media, ‘no comment’, ‘we are monitoring the situation’ and ‘our company does not take political positions’ were previously reasonable public positions. This is no longer the case, and any CEO who appears unprepared on political matters of public interest may be seen as aloof at best, and inauthentic at worst.

Political risks

Beyond the general public, Boards are also increasingly unwilling to accept a shift in ‘external conditions’ as an explanation for failing to deliver results. Many companies whose earnings were

affected by the volatility of the British Pound in the wake of the Brexit vote report having tough conversations at Board level about whether they could have prepared and mitigated better.

Boards have grown in confidence in their responsibility to act on nontraditional business risks such as climate change, cyber security or ethics.

No longer is the ability of management to fully measure or forecast a ‘new’ risk seen as an acceptable response and having a list of ‘known-unknowns’ can be seen as shirking away from the

issue. CEOs can expect Boards to want to see geopolitics appearing on the risk register, as well as mature mitigation and response plans.

Three proactive responses

According to the report, there are three proactive responses to today’s geopolitical uncertainties:

1. Appoint a Chief Geopolitical Officer. A CGO is a member of the senior leadership team with single-point accountability for managing the impact of politics on the company’s business interests.

2. Conduct a geopolitical stress test. Getting a handle on current levels of activity and exposure to geopolitical developments is an important building block, especially if this hasn’t been a subject of active thought for the CEOs. One way to do this is to conduct a geopolitical stress test on the strategy and planned initiatives.

3. Implement a geopolitical forecasting and monitoring solution. For companies to truly feel like they have a handle on geopolitics, they should go beyond relying on mass media for information and invest in specialized geopolitical forecasting and monitoring capabilities.

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