C200 member Lisa Pollina is a global financial services executive who has negotiated $50B+ in corporate development deals and served on multi-national boards for over a decade. She currently advises private equity investments for Ares Management (NYSE: ARES) and serves on the Board of Directors for Munich RE and Amsurg. She is a member of the Board of the Atlantic Council of the United States and the Council on Foreign Relations.
In today’s dynamic global landscape, geopolitical unrest has become an unwelcome reality for business leadership. From trade tensions to regional conflicts, the effects of political instability can eliminate markets and sales channels, disrupt supply chains, erode investor confidence, and strain organizational resilience.
Effective leadership requires a holistic strategy that integrates the principles of duty of care balanced with financial performance, employee welfare, stakeholder interests, and the overall well-being of the organization. Navigating through turbulent times, leaders must carefully weigh the following aspects:
- Protecting Employees: Ensuring the well-being, safety, and fair treatment of employees is primary.
- Stakeholder Considerations: Leaders should weigh the impact of decisions on multiple, diverse stakeholders such as customers, suppliers, and the community.
- Safeguarding the Bottom Line: While financial performance is essential, leaders must also focus on broader responsibilities worldwide
- Organizational Well-Being: Beyond profits, leaders must maintain the organization’s health and sustainability.
As senior leaders and board members, your strategic acumen and foresight are the lifelines for your company’s survival and growth. The intersection of leadership, geopolitics, and duty of care is complex, requiring intentional diligence in the face of change.
We must measure the organization's readiness and strategic approach to geopolitical instability.
Balancing Business Presence Amid Geopolitical Unrest
As both business leaders and Board members, we must first measure the organization's readiness and strategic approach to geopolitical instability. Deliberate and transparent strategic planning aids in navigating challenges, enhancing organizational resilience, and positioning the organization for success in an unpredictable global environment.
Facilitating thoughtful discussions is paramount. These four key questions serve as cornerstones for further, tailored dialogue:
1. What's the Optimal Duration for Exiting and Reentering?
This question acknowledges the organization's duty to assess the level of risk and instability in a particular region. In the volatile landscape of geopolitical shifts, boards must deliberate on the duration of a potential exit strategy and the conditions conducive to a safe return. The dynamics of the situation must be fully understood in order to determine appropriate timing, aligning with the organization's risk tolerance and long-term objectives.
2. In Times of Global Turmoil, Do You Leave Business in That Country?
Addressing whether the organization should maintain its operations in a country undergoing political turmoil requires a careful evaluation of risks, benefits, and ethical considerations. Boards need to weigh the potential impact on employees, stakeholders, and the organization's reputation. The board should also consider the broader implications of continuing business operations in politically unstable regions.
During the apartheid era, companies operating in South Africa grappled with geopolitical challenges due to discriminatory policies, triggering global opposition. Supporting apartheid carried substantial reputational risks, subjecting corporate engagement in South Africa to scrutiny from consumers, investors, and employees.
In response, some companies chose to divest, aligning with the global anti-apartheid movements, while others engaged constructively, advocating for change from within. The most successful leaders demonstrated adaptability to changing geopolitical dynamics, showcasing the intricate interplay between ethical considerations and business strategies in the face of significant geopolitical challenges.
3. How Frequently Should We Review Our Strategy?
Given the fluid nature of geopolitical events, the board must establish a systematic approach to revisit and reassess its risk strategy as well as past decisions taken. Regularly scheduled reviews ensure that the organization's response remains aligned with the evolving political landscape. This question emphasizes the importance of adaptability and proactive risk management, encouraging the board to stay vigilant in monitoring global conditions.
The Boston Tea Party, a pivotal event in American history, reflects strategic principles relevant to today’s challenges. As colonists adapted to a changing political landscape, leaders of the British East India Tea Company grappled with their own strategic decisions.
Facing resistance from American colonists over British taxation policies, the company had to decide if they would continue to sell tea in the colonies. Despite a monopoly granted by the Tea Act of 1773, leaders were wary of backlash from colonists. Balancing economic interests with political realities, they chose to ship tea to the colonies, which ultimately led to the Boston Tea Party.
Similarly, modern boards must carefully consider the implications of their actions, balancing between short-term gains and long-term consequences. Adaptability to evolving circumstances is critical for effective strategic decision-making.
4. What's Our Approach to Monitoring Developments?
Monitoring geopolitical instability requires a structured and informed approach. Regular readouts at board meetings, incorporating insights from experts in political risk analysis, can provide the necessary intelligence. This question underscores the need for a robust monitoring system that considers real-time updates, scenario planning, and the interests of all stakeholders. A proactive stance in gathering and analyzing relevant information enables the board to make informed decisions aligned with the organization's objectives.
Following the dissolution of the Soviet Union and the ensuing transformations in Russia and Eastern Europe, McDonald's board of directors understood the burgeoning opportunities arising from the shifting political dynamics in the region and strategically positioned the company to capitalize on these emerging markets.
In 1990, McDonald’s opened its first restaurant in Moscow, becoming the first American fast-food chain in the Soviet Union. Over the decades since, massive expansion there continues, and the company's success serves as a valuable example of how the Duty of Care can be exercised after monitoring for long-term profitability opportunities in dynamic global environments.
Leveraging Partnerships in Uncertain Times
Navigating geopolitical unrest is challenging and presents opportunities for forward-thinking leaders and organizations, notable via collaboration and partnerships. In the face of shared challenges arising from geopolitical unrest, exploring collaborative efforts with other organizations, industry groups, and government entities and regulatory bodies can thwart business rigidity and vulnerabilities.
By forming alliances, organizations can pool resources, share insights, and collectively address the complexities that geopolitical unrest introduces. Strategic partnerships, whether within the industry or across sectors, can contribute significantly to mitigating risks. The diverse expertise brought by different entities can provide a more comprehensive understanding of the geopolitical landscape and enhance the collective ability to navigate uncertainties.
Collaboration fosters resilience. As organizations face geopolitical challenges together, they build a network of support that can withstand disruptions more effectively. This interconnectedness not only contributes to risk mitigation but also opens doors to innovative solutions that may emerge from the shared knowledge and diverse perspectives within the collaborative framework.
The Renault-Nissan-Mitsubishi Alliance is one example. These three major automakers formed an alliance to pool resources, share technologies, and achieve economies of scale. This collaboration enhances their competitiveness in the global market while also helping them navigate geopolitical challenges. During trade disputes or regulatory uncertainties in certain regions, alliance members can adjust their production and supply chain strategies collectively to mitigate risks and maintain market presence.
Conclusion
Your organization, guided by an informed board, has the capacity to contribute meaningfully to the global landscape. Chart a course with clarity, adaptability, and a visionary perspective. Let these principles guide your decisions, inspire your teams, and shape the resilient future of your organization.
The challenges of geopolitical uncertainty are formidable and so is the potential for growth, innovation, and lasting impact. Intentionally applying the Duty of Care as a Board member has never been more necessary to navigate churning waters and lead corporations to enduring success.
