LEADERSHIP INSIGHTS

The world has rarely felt so difficult to read. In the space of a few years, business leaders have navigated a pandemic, the Russia-Ukraine conflict, the mainstreaming of artificial intelligence, the disruption of tariffs reshaping global trade and an escalating crisis in the Middle East.

 

What is striking is the scale of what is now asked of business leaders. Companies increasingly have to assess geopolitical risk in the same way that countries do: map spheres of influence, anticipate conflict; and stress-test supply chains against scenarios that would once have seemed unthinkable. 

 

We spoke to senior leaders and Board-level directors about what strategy looks like in a multipolar world, how Boards need to think differently about risk, what good governance looks like when the picture keeps shifting and how leadership teams can build the resilience to weather whatever comes next. 

 

Sandy Stash, Non-executive Director, Trans Mountain and Board Mentor, Criticaleye

 

Good strategy is premised on three things: understand the external context and direction of travel; analyse the competitive landscape thoroughly; and make an honest assessment of what your organisation is actually good at — and what it is not. It's amazing how often strategy discussions aren't grounded in these fundamentals. 

 

Risk management has too often evolved into its own silo. A better Board practice is to discuss risk and opportunity as a joined-up conversation. Take AI — it will be both an opportunity and a risk for most companies. Those two things belong in the same discussion. 

 

Behaviours follow practices. Boards need to move away from the executive team simply reporting to them at Board meetings and towards everyone sharing their particular perspectives on the state of play — short, sharp and regular. Block an hour on the first Tuesday of every month. You can always cancel, but that habit means you're more likely to have the rich conversations you need when the world moves this fast. 

 

John Shelley, Non-executive Director, Standard Chartered Bank (Hong Kong) and Board Mentor, Criticaleye 

 

I do not think that Boards need a different approach to risk. Organisations should already have identified the risks inherent in their business and how those risks are either mitigated or accepted — this is part of normal governance. They should also have run scenarios for extreme events, sometimes at the individual company level and in some industries at the industry level, facilitated and challenged by regulators. 

 

When low probability but very high impact risks actually happen — as they do now — leadership teams need to move from 30,000 feet down to zero. Think of it like a medical situation: what is the most life-threatening injury; how do we deal with that; [and] how do we stabilise the patient? Then you can step back and think strategically again. The Board needs to support that process without diving in and taking over — unless perhaps there are particular circumstances where one of the directors may take on an executive role for a temporary period. 

 

The world is in a state of flux that is likely to last for a decade or more. This is the end of the post-war rules-based world order and the rise of a world where the strongest nations exert spheres of influence through economic and military power. Boards should not try to guess the outcome. They should make sure their management teams plan for regular disruption, volatility and mistrust. 

 

Dominic Emery, Chair, HutanBio and Board Mentor, Criticaleye 

 

Good strategy right now looks like resilience — being prepared to weather the outcomes of very unpredictable events. I can't really think of a time when there has been turmoil after turmoil — some of it without an obvious exit path. We are seeing a particular combination of the chronic underlying impacts of climate change with acute events from pandemics, through to wars and tariffs, along with AI, which is very challenging to navigate. 

 

Having been involved in a strategy at BP that was a bet on a particular climate-friendly outcome, and having seen that not go well because of an acute geopolitical outcome, I am only too aware of the downsides of the big bet. The current clouds of uncertainty mean that resilience is critical, risk management is critical and diversification in both markets and supply chains is essential. Having all your eggs in one basket, be it a market segment, a country or a product, is a super dangerous game. Yesterday's ally can become someone much harder to do business with today and tomorrow. 

 

From a risk management perspective, it is key to get the executive and Board on the same page. I have seen tension where the executive tends to see risk management as a process, whereas the Board sees it more as an opportunity to get deeply into content and mitigation. There can be too much fixation on individual markets and financial outcomes, and it can be hard to lift heads above the week-to-week before it is too late. Whereas a Board can step back and say, ‘Have you considered the geopolitical and associated second and third order risks?’, before deepening or diving into this particular country or product or supply chain? 
 

A good strategy is one that can be executed — it  understands an  organisation's competency and capability, and, as such, can be achieved.  

 

There is more potential for disagreement on Boards right now than in a normal environment. You've got governance-oriented non-executives who've never run businesses wanting growth with no risk — and the two don't work together. Boards want information to support decisions, but at the moment, the information isn't perfect.  

 

The better Boards and leadership teams concentrate on what they can influence rather than what they can't. There is a danger of spending too much time on things outside your control.  

 

Risk is all about opportunity—the best CEOs understand risk better than anyone else, and take advantage of it. High-performing CEOs and Boards love risk, because  they identify the opportunities and price it in. 

 

Venkataramanan Anantharaman, Chair, TransUnion CIBIL and Board Mentor, Criticaleye 

 

Technology, generational change in behaviour and attitudes, continuous and faster change in competitive dynamics and availability of long-term capital are all factors that need to be considered far more rigorously when looking at strategy today. Risks, too, have changed with geopolitical factors and cybersecurity ... they need to be considered. 

 

Board discussions often skew towards risks and less towards opportunities. Getting this balance right in a dynamic environment is important. I find it very useful to have an external thought leader from the industry speak with the directors and senior management on market developments, projections and views.  

 

A discussion at the Risk Committee and Board, as opposed to – or in addition to – a PowerPoint presentation from management, would be far more valuable in exchanging views, drawing on Board members' experience and help management formulate risk mitigants as well as take advantage of opportunities. Risk registers are typically reviewed once a year. This may need to move to half-yearly. 

 

There is certainly a decrease in consumer confidence. … There is uncertainty on things like energy availability and cost, potential second-order disruptions in areas like chip manufacturing that impact a host of downstream consumer and industrial products, combined with the continued negative impact of climate change. 

Bridgette Hall, Senior Editor, Criticaleye