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The importance of geopolitics in the boardroom

Geopolcast: Season 1 – Episode 1

September 11, 2023

A must-listen podcast exploring a broad spectrum of geopolitical topics, bringing expert analysis and actionable insights.
Credit and Political Risk|Geopolitical risk - Understand
Geopolitical Risk

The past couple of months have seen the Russian operations of two well-known global businesses seized by the Russian government, even though both companies were already trying to exit Russia. Such cases in Russia dramatically highlight the challenges corporate boards are facing.

With regards to operations in China, a new survey of German companies operating in China found that 55% plan new investments there, that's down from 72% three years ago. 58% blame poor market conditions, 44% blame geopolitical tensions and 28% blame China's economic policies targeting self-reliance, for example Made in China 2025.[1] WTW's 2023 Political Risk survey showed that Russia and China now top the league of countries where companies suffer the most political risk losses.

In this episode of Geopolcast, Elisabeth Braw, senior fellow at the American Enterprise Institute, explores the importance of geopolitics in the boardroom with Lord Jonathan Evans, Director-General of MI5 until 2013, and Stuart Ashworth, who leads WTW's political risk business from the headquarters in London.


  1. German Chamber Post-COVID Flash Survey: Business Outlook Restrained by Market Development and Geopolitics,” June 2023. Return to article
Episode 1: The importance of geopolitics in the boardroom

Transcript for this episode:

STUART ASHWORTH: If you can protect yourself and improve your position by partnering with people, then why wouldn't you do it, particularly if there's a proxy war that's going on in commerce and geopolitics. These companies, particularly if they're national champions, will end up becoming viable targets. They could be cyber hacked. They could have their licenses removed or nationalized. And if you're becoming a target, you want to make sure you've got as many people as possible on your side. And if you can share intelligence, then that's a really smart thing to do.

ELISABETH BRAW: Welcome to Geopolcast, a new podcast from WTW exploring geopolitics and its impact. My name is Elisabeth Braw. I'm a senior fellow at the American Enterprise Institute. I'm also a columnist for Foreign Policy and Political Europe, where I focus on the busy intersection of geopolitics and globalization.

It's important not to assume any one future outcome. You've got to have a spectrum of possible outcomes and maintain as much flexibility as you can.”

Lord Jonathan Evans | Ex Director-General of MI5 and chairs The Committee on Standards in Public Life

In each episode of the Geopolcast, I will be joined by two expert guests with whom I will discuss subjects, including China and the security impact of climate change. With that, let me turn to today's topic, the importance of geopolitics in the boardroom. To help us get to the heart of the question, I'm delighted to be joined by two subject matter experts.

Lord Evans, Jonathan Evans was director general of MI5 until 2013. Before being appointed to the top job, Lord Evans had a long career in MI5 counter-espionage and counter-terrorism. He has since served on numerous corporate boards. He's also a member of the House of Lords and chairs his committee on standards in public life.

Stuart Ashworth leads WTW's political risk business from the headquarters in London. Prior to this, he spent nine years in Singapore looking after WTW business in Singapore, Hong Kong, Japan, and Australia. The past couple of months have seen the Russian operations of two well-known global businesses seized by the Russian government and that happened even though both companies were already trying to exit Russia.

Such cases in Russia dramatically highlight the challenges corporate boards are facing. And as regards operations in China, a new survey of German companies operating in China found that 55% planned new investments there. That's down from 72% three years ago. 58% blamed poor market conditions. 44% blamed geopolitical tensions, and 28% blamed China's economic policies, the ones targeting self-reliance, for example, made in China 2025.

WTW's 2023 political risk survey showed that Russia and China now top the League of countries where companies suffer the most political risk losses. So Stuart, turning to you first, is there such a thing as pure commerce anymore? Or is geopolitics overshadowing every aspect of companies operations?

STUART ASHWORTH: Well, firstly, thank you very much for the invitation to be on the podcast and also for the warm introduction as well. Fantastic experts I think we'll try and live up to the-- live up to the hype and the expectations. Is there such a thing as pure commerce anymore? I mean, I don't know if there really ever have been.

International commerce is about a comparative advantage in some sort of tradable commodity, be that availability or accessibility. And it's hard to think of a time when there wasn't some sort of geopolitical lens over all of this. If you go back to the Punic Wars or the Phoenicians 3,000 years ago, it was all about trying to control trade, trying to control trading routes, sea lanes.

And there's been a succession of Western European trading empires Portuguese, Spanish, English Dutch. So geopolitics has always been out there. And in many ways, the last 80 years since the end of the second World War is probably a bit of an aberration in history that there hasn't been an enormous geopolitical lens and part of that is because of the institutions that were established after the war. The World Trade Organization has allowed trade to flourish. But increasingly, trade and investment policies are being linked to national security interests.

ELISABETH BRAW: And I wanted to bring you in, Lord Evans, because it seems to me that corporate boards are in a really tricky position at the moment. All of this is-- the geopolitical developments are troubling to hand off for any company. But on top of that, they are totally unpredictable. So what is the right way for boards to consider geopolitics when, in a way, they can really only be reactive?

JONATHAN EVANS: Well, I think the first thing is to give thought to what we mean by geopolitical risk, and the way it will play out will depend on the nature of the business. If you are a global trading organization, if you're a global bank, particularly one that straddles different markets, including China and America, et cetera, then that has a different impact than if you're a manufacturer.

So you need to always think start with your own company, how as a company do you make value, and where do the risks lie. And geopolitics can lie behind lots of other risk categories. So supply chain risk, legal risk, operational risk of various sorts. So I'm not always sure that the best thing to do is to start with the world out there. I think the first thing to do is to look at your own company, what actually matters to you, and then think how geopolitics impacts that.

ELISABETH BRAW: Now, let's say, you're a well-loved global brand with no political agenda and yet your operations are shut down with seemingly little justification. What can you do as a board to protect yourself and minimize the risk?

JONATHAN EVANS: Yeah. I think geopolitical risk in those sense, in that sense, in the sense of the developing of separate power blocks across the world is going through a significant change. I mean, the general direction of travel for 20 years was towards greater globalization, conversations in some boardrooms about whether it actually needs effectively to have a home base. Does that mean anything?

But obviously, the way in which geopolitics has developed over the last 5 to 10 years, particularly over the last five years, is in the other direction. So what made a lot of sense 10 to 15 years ago might look very different today. In a way, you're only getting back to what was normal 20, 30 years ago. So you need to take a long view on these things.

ELISABETH BRAW: And that long view, Stuart, should include people with subject matter expertise. But what exactly is the subject matter expertise that companies need on their boards when it comes to geopolitically linked risk? What sort of experts do corporate boards need in order to assess these risks as best as they possibly can?

STUART ASHWORTH: Yeah, I think there are some challenges. I guess to pick up on the point that the Lord Evans made is there were probably two different types of risks that boards need to think about. There's macro geopolitical systemic risks, which is the power shift from east to west. We're looking at climate change. And then there's more localized geopolitical risk, which are going to impact specific industries, specific countries, specific customers and clients.

And I think companies need to be aware of all those different risks, because they're going to affect them in different ways. And the most important thing is it's to understand how you can be impacted by any of those events that take place. So I think there's-- and I guess managing political risks is a process. It's not really a product.

There's no one easy solution, particularly looking at the macro systemic issues. But you've got to understand if an event came to pass, what would it mean for me as a company? What risk tolerance do I have for that event? How would it impact me, my suppliers? Where would I get alternative things or alternative components from?

Nowadays, I think availability is the new innovation. You need to make sure that you can get whatever components you can. And if you can't get them, what's the next step? So I think that's all part of the process. Now, then the question and the challenge is, where do you draw that information from. So if you appoint somebody to be the custodian of this responsibility, they're going to have local people on the ground. Now, that may not always-- that will be a slightly, I guess, tainted view on what's happening on the ground.

People always have a slightly more positive view of their geography when they're in it. There's a lot of information out there. So one of the challenges for boards is it's drinking from the fire hose. There's an enormous amount of information that's being thrown at you and poured at you. And how do you distill what is white noise from actually valuable information?

So I think there's a huge communication part that goes on. That information needs to be consumed, understood, communicated back to the board. And then it's really trying to understand that tolerance part around, OK, these are the 10 risks in front of us, which five am I comfortable taking or which two am I comfortable taking? What have I committed to my shareholders, my stakeholders?

And if I'm not comfortable taking it, what are the alternatives? If the worst were to come to pass, and I think scenario planning is a great way of doing this. If you take things to their natural conclusion, what does it mean for me, for my company? And are we still going to be around here in 12, 24 months if these things happen? And if there's a risk, what do I do about it? How do I lay those risks off to another party? Or how do I get expertise in to manage those things?

ELISABETH BRAW: And Lord Evans, on that note, drinking from the fire hose, that is exactly what you have been doing for so many years in counter-terrorism when anything, everything can be a threat and yet as liberal democracies, we can't completely shield ourselves. What can companies today learn from the way western governments have managed and-- indeed, western companies have managed the terrorism threats over the past couple of decades.

JONATHAN EVANS: Yeah. I mean, when I was the head of MI5, obviously, I had access to most of the intelligence flows coming into the British government, and I was a member of the Joint Intelligence Committee. But I would tell you I would read The Economist cover to cover every weekend, because actually, 98% of what you need to know about the world is well known publicly.

So actually, I think the famous well known sources of information are still very, very strong. And it's very rare that something is completely missed through open source. Counter-terrorism is a bit different, because there are two levels of it. There is, of course, the strategic level, and terrorism threats very often grow on the back of other geopolitical fault lines, economic issues, cultural, religious issues.

We see that manifested very clearly both in the Middle East and also in Africa. But there's also a much more granular level, which is which person is doing what now that we need to worry about. And that brought two challenges. And I can remember historically thinking about this. The first one is you desperately need high volumes of information in order to let your desk officers understand and have the best chance of finding out what's going on.

But if you get those flows running, the next thing is how on earth do you make sense of this mass of material? So you've got two technology challenges, one is access and then sorting and getting meaning out of it. I think there is some very good technology now available for starting to make sense of the masses of data that many corporates have.

And I think that's critically important, because you can be just as lost in the noise as you can be baffled by the silence. So that's important. But also, it needs to be very carefully filtered, I would say, before it comes to a board. Because I mean, one of the big risks on a corporate board is you get given a board pack of 1,200 pages. You can't even pretend really to have read it in detail.

But if it's landed on your desk, and if you're in a regulated industry, you'll be assumed to know it all. So I think the first thing to do is actually get really effective filters and people who can pick out the stuff that matters. And there are some very good people out there who are used to handling these sort of issues and can interpret this mass in a powerful way.

ELISABETH BRAW: And can I just make it a nerdy observation there, Lord Evans? Do you think that AI can help companies better collect all this information, all these indicators that may be out there and then leave it to their own human analysts to pick out what needs to then be looked at further and eventually perhaps passed on to the board?

JONATHAN EVANS: I think AI can probably do both. I mean, I think AI is useful at the collection level, but it's also very helpful at identifying particularly anomalous activity within a mass of data, for instance. And I think one sees this increasingly in the legal world that actually, you don't need to have quite so many racks and banks of junior lawyers. Because technology can help you through that.

And AI, I mean, as we all know, there are different sorts of AI, and they have different strengths and vulnerabilities. But AI undoubtedly is a useful way of making sense of vast quantities of data so long as it is correctly constructed.

Somebody was saying to me, somebody very well informed yesterday or a few days ago was saying, the trouble with large language models is that they're like the most convincing bluffer you've ever come across, unbelievably convincing, very, very eloquent, full of all sorts of information but with very little relationship to truth. So I mean, that'll change, but you shouldn't go into this without recognizing the vulnerabilities.

ELISABETH BRAW: Yes. Now, Stuart, if can come back to something you said, which is if you have lived in a country, spent a significant amount of time there, then you have a stronger affinity. You feel a stronger affinity for that country, but the way some key markets are developing is that it's becoming quite risky for western expats or undesirable for western expats to live there, even to spend significant amounts of time there.

So what does that mean for the understanding of these markets within companies, where key executives don't really have a personal understanding of these countries? And yes, they have operations there but not involving any senior leadership perhaps. And how can you assess, as a board, properly assess a country that you may not have ever set foot in?

STUART ASHWORTH: I mean, that is a challenge. So when you've got someone that's lived in a country, and we've had meetings before where you can look at a war torn country. And you speak to the guys on the ground, and they will swear blind it's the nicest place you've ever been to, friendly people, running water, electricity. And it's amazing what you get used to when you understand the local challenges.

But the reality is often somewhere we move particularly when you're trying to appeal to your shareholders who may not have that risk appetite. Having people on the ground is important. But one of the challenges is that if you're in a totalitarian regime, the media is constrained for what it can tell you. So actually, there is a limit from what you can actually get from local sources if you're-- if you're just reading that.

So you do need that local Intel, but one of the things that I think Lord Evans mentioned is a lot of this information is out there in the public domain. If people are going to make wide political changes or they're going to look to enact laws or to launch military operations overseas, often these are advertised. And they're signposted by social media campaigns, by pledges on the campaign trail.

These things, generally speaking, don't come out of nowhere. Populist leaders have and increasingly have a manifesto that they need to deliver. They will have promised things, they'd have propagated their ideas, they're building a popular support base. And when you look at what was happening with Putin writing his ideologies and his essays in advance as to what he wanted to do, if you look at some ranting on social media before the Wagner Group moved towards Moscow, these things are being signposted.

But you need to be alive to that. You need to understand that these are not theoretical risks. These can genuinely happen, and you need to draw all those different sources together. It's like a tapestry. You need to pull those bits and pieces together. And when it does come together, it actually looks-- it looks pretty interesting.

ELISABETH BRAW: Lord Evans, I want to bring you in again on that note, the affinity to countries and how to best understand them.

JONATHAN EVANS: I think Stuart's absolutely right about those as it were weak signals suggesting that there might be something there to worry about. I think when you're trying to translate that into business strategy, it's important not to assume any one future outcome.

I think you've got to have a spectrum of possible outcomes and then maintain as much flexibility as you can, because however brilliant the data feed, however brilliant the experienced, the analyst, you can't foretell the future. So there may be a likely outcome, but there are going to be a range of possible outcomes.

And I think it's important to keep your mind open to that. I mean, the classic model, the shell model from the '50s of scenario planning, I think there are attractions to that. Because it makes you keep your options open, maintain optionality, and ensure that you aren't having to pick a, as it were, pick a winner out of all these different spectrums and different options that are out there. So keep your flexibility but be aware of what the range of outcomes might be.

ELISABETH BRAW: And if I can just follow up with one question for you, Lord Evans, along those lines of optionality and exercising, going through the different scenarios. I remember during the Cold War, Sweden had fantastic total defense exercises that involved the armed forces-- obviously, all parts of the government-- the armed forces, civic organizations, the Red Cross, and so forth.

But there were also key companies that they could exercise contingency scenarios involving really every part of society. Do you think that such exercises may become desirable or indeed indispensable? Again, not involving invasions in areas here in our western countries perhaps, but other severe national security scenarios.

JONATHAN EVANS: I think that's a very-- I think it's a very good idea to make sure that these things are done on a cross-sectoral level. There was an interesting report by the Intelligence and Security Committee of Parliament a couple of weeks ago talking about gray zone threats, particularly in that particular case talking about China and saying that in order to maintain our national security in future, we're going to need a whole of society response.

This isn't something you can just leave to the military and the intelligence services. And I think if you look at areas like anti-money laundering and financial crime, there are some good models starting to emerge where law enforcement regulators and companies are working together on these things. None of all of those organizations have an interest in getting this right.

And therefore, the better you can do the information sharing, the stronger it is. And the other one I would cite is what I think has been quite a lot of success of the National Cyber Security Center partly because they are humble enough to accept that they don't have all the answers here. And actually, the private sector have capabilities and will have information that are absolutely vital if you are to understand the nature even of some state cyber threats.

ELISABETH BRAW: Stuart, is that something that you think would be easily implementable on the private sector side, closer collaboration with the government not through any legislation, just on a voluntary basis to go through risk scenarios involving geopolitically risky countries?

STUART ASHWORTH: Well, I think so. Increasingly, when you've got trade measures that are interwoven with defense and diplomacy that there is a-- private companies and the government are now in lockstep. And actually, everyone's got the same aligned interest. And if you can protect yourself and improve your position by partnering with people, then why wouldn't you do it?

Particularly, if there's a proxy war that's going on in commerce and geopolitics, that these companies, particularly if they're national champions, will end up becoming viable targets. There could be cyber hacked. They could have their licenses removed or nationalized. And if you're becoming a target, you want to make sure you've got as many people as possible on your side.

And if you can share intelligence, then that's a really smart thing to do. Because there is no sign that this is abating-- this is going to be with us for a fairly long period of time. These challenging times are going to increase, and you're going to want to build up the resilience and the partnerships.

ELISABETH BRAW: And they can really hit any company in any situation. As we speak, the Iraqi government has said it will revoke work permits for employees of a global telecommunications company working in Iraq. This company was clearly not expecting they would face such geopolitically motivated actions resulting from a complex chain of events.

It is a clear illustration of how companies are becoming targets in geopolitical conflicts. But with that, we have run out of time. So it's time for me to thank Lord Evans and Stuart Ashworth, even if you don't have all the answers, for flagging up all the things that the companies, corporate boards may want to consider and give them some ideas about the options available to them.

And it really is an extraordinary time we are living in when any company, even the most benign ones, ones involved in dairy products or beer or indeed, apparel or telephony can be targeted. So with that, thank you, Jonathan Evans, Lord Evans. And thank you, Stuart Ashworth. And above, thank you all for listening to Geopolcast.

Next up, we'll be examining China's trajectory with the Dean of China experts. If you want to hear more geopolitics chat, make sure to subscribe. You can find us via your usual podcast players, and please recommend us to your friends and colleagues too. And if you like, you can contact me with comments and questions. You can find me on Twitter at Elisabeth Brewer and at Elisabeth with an S. Thank you and see you soon.

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Podcast host

Elisabeth Braw
Senior fellow at the Atlantic Council

Elisabeth is a Geopolitics expert who has been consulting with the WTW Research Network since 2019, specifically exploring grayzone aggression and looking at its implications for risk managers. This work forms part of a wider research programme on geopolitical risk, including the importance of China and security impacts of climate change.

Elisabeth is also the author of Goodbye Globalization, which was published by Yale University Press in February, 2024.

Episode guests

Head of Broking and Market Engagement & Head of Credit and Political Risk for Corporates

Stuart Ashworth is Head of Credit and Political Risk Insurance for Corporates and Head of Broking and Market Engagement for WTW's Financial Solutions team. Prior to this he spent nine years in Singapore, looking after WTW business covering Singapore, Hong Kong, Japan and Australia.

Lord Jonathan Evans
Ex Director-General of MI5 and chairs The Committee on Standards in Public Life

Lord Jonathan Evans was Director-General of MI5 until 2013. Prior to that, he had a long career in MI5 counterespionage and counterterrorism. Lord Evans has since served on numerous corporate boards, is a member of the House of Lords, and chairs The Committee on Standards in Public Life.

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