How to Vet Geopolitical Risk in the Boardroom

Key Points

• Vetting key lines of the corporate income statement for geopolitical sensitivities gives directors a concrete, repeatable framework for risk oversight.
• Geopolitical shocks carry threats as well as potential upsides, such as expanded research and development funding tied to national security priorities.
• Boards that build robust geopolitical frameworks and conduct regular tabletop exercises before a crisis strikes are better positioned to act decisively when one does.

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These are difficult times for directors: Intensifying global competition, conflicting economic forecasts, and rapid technological change are hard enough to track. In addition, boards must make sense of the geopolitical risks that seem to emerge with every new headline.   

Boardroom conversations about the latest global crisis often surface real concerns, only to end with a collective shrug at how little the board can do in response. Geopolitical risk management, however, can be systematically incorporated into board oversight long before calamity strikes. Even firms with limited international footprints ...