5. Set up a cross-functional geostrategic committee
Political risk governance appears to be siloed in many companies. Only about 40% of companies use a committee to govern political risk management, indicating that responsibility in most companies resides within a single function or individual. Companies should establish a cross-functional geostrategic committee including representatives from across the political, operational and financial aspects of political risk management. Country and functional teams are more aware of local political risks but there often isn’t an effective aggregation of such risks at the global level. So committee members should come from both the C-suite and relevant functions or business units. The committee should meet regularly to discuss the political risks the company faces, how and where those risks are likely to impact the business, and what is and should be done to manage them. This committee should also frequently report to the board of directors.
Companies taking these steps will develop a more proactive, comprehensive and balanced approach to political risk management. And taking more proactive actions to identify, assess and manage political risk will improve executives’ confidence in their ability to manage it, providing the confidence to pursue bolder, political risk-informed, growth-oriented strategies.