Source: Global Times
Geopolitical risks are bringing increasing pressure and challenges to global multinational giants. On the 23rd, the Financial Times reported that the Israeli Israeli Israeli conflict was an example of a dilemma in the business world, where some companies were criticized for standing in line, while others were condemned for being silent. In recent years, the West, especially the United States, has turned the global economy into a "new battlefield", poisoning the business climate, creating conflicts, and even directly intervening in corporate economic activities through political means. In this situation, more and more multinational corporations are setting up specialized departments to assess geopolitical risks.
Chief Geopolitical Risk Officer
Japan's Nikkei Asia Review reported in the 24th daily that in order to avoid the US imposing sanctions on emerging fields such as artificial intelligence and chips in China, venture capital institutions and Jade Capital have adopted a scorecard based on five indicators to evaluate their investments. The scorecard is developed by a risk assessment team composed of economic and political experts, including former White House staff, financial regulators, and other professionals with international political and economic backgrounds.
The US containment policy towards China has brought pressure to some companies. According to reports, a new fund launched by Heyu Capital, the "Core Values Alpha Greater China Exchange Traded Fund", which focuses on the Chinese exchange, uses this scorecard to ensure that their "interests will not be harmed when investing in China". 80% of the fund's funds are invested in Chinese companies or companies with the majority of their income coming from China, while the remaining investment flows to companies such as Apple that have a significant market share in the Chinese market.
As global tensions escalate, companies from various countries are seeking geopolitical advice. The Financial Times reported that some Japanese companies have established the position of 'Chief Geopolitical Risk Officer', while companies such as Hitachi and Suntory hire former diplomats, international relations experts, and foreign journalists to provide advice directly to executives. Companies seeking more guidance have led some former intelligence officials and diplomats to enter the private sector. Former UK National Security Advisor Stephen Lovegrove became a senior advisor to Lazard Investment Bank this year, while former MI6 head Alex Young joined Goldman Sachs as an advisor in 2021. Mark Freebain, a partner at headhunting company OJ é s Talent Consulting Limited, said that companies hiring former ambassadors, military, and intelligence officials for consulting work may incur consulting fees of up to £ 2000 to £ 5000 per hour.
The United States has turned the global economy into a new battlefield
Since the new round of the Israeli-Palestinian conflict, multinational enterprises have faced a dilemma caused by geopolitical conflicts. According to ABC News 24, 150 major companies such as Starbucks and McDonald's have sparked controversy over their stance in the Israeli-Palestinian war, reflecting the challenges posed by geopolitics to businesses. McDonald's in Israel has recently distributed free meals and offered discounts to Israeli military personnel, as its actions have led to disputes in the Middle East region. According to CNN's 23rd daily report, many McDonald's operators quickly distanced themselves from Israeli operators. Nevertheless, there are still calls for a boycott online, and there are reports that McDonald's stores in Arab countries have been damaged.
The Financial Times analyzed global corporate documents on the data platform AlphaSense and found that since 2017, "geopolitical" has been mentioned more and more frequently. According to the report, many enterprises were caught off guard by the Russia-Ukraine conflict that broke out last year, and the use of this word has soared.
"The global economy is increasingly becoming a battlefield where only the United States has an overwhelming advantage." An article published on the 23rd of the South China Morning Post in Hong Kong commented that since the Russia-Ukraine conflict, the global economy has been weaponized, turned into a battlefield against Russia, and is falling on the ground against Russia. Although it appears to be a conflict between Ukraine and Russia, with NATO playing a secondary role, the potential economic war is directly initiated by Washington. The rapid and large-scale implementation of comprehensive sanctions, "entity" designation, technology transfer restrictions, and asset freezing against a single opponent are all new economic weapons in the hands of the United States, which can enhance its strength in the short term, but in the long run, they are not conducive to world trade and globalization.
In the future, multinational corporations will survive in complex geopolitical and political environments. To avoid risks, they need to make a transition from prioritizing efficiency in the past to prioritizing security and politics. "Zhang Hong, a researcher at the Russian Institute of Eastern Europe and Central Asia at the Chinese Academy of Social Sciences, told Global Times on the 24th that individual countries led by the United States have used economic weapons to sanction other countries, The non market influencing factors and risks continue to rise. The golden era of globalization after the Cold War has come to an end, and the environment for global business operations of enterprises is becoming increasingly complex and risky.
Develop emergency plans
Marcia Minoway, CEO of Eurasia Group, a geopolitical consulting firm in the United States, stated that multinational corporations have begun to develop contingency plans for geopolitical crises, similar to responding to natural disasters. In the future, this will become a regular part of long-term strategic planning.
For companies at the forefront of global trade and investment, geopolitics has become their main concern. Former Dean of the School of Business at the National University of Singapore, Huang Zhaohu, stated that in today's rapidly changing and unstable geopolitical environment, the cost that businesses need to bear is heavy. In order to maintain competitiveness, enterprises must find new management methods, especially ways to avoid and overcome the challenges brought by geopolitics.
According to an analysis by the Financial Times, shareholders of the company have realized that geopolitical issues pose a threat not only to the company's reputation, but also to its balance sheet. The South China Morning Post cited the US sanctions against Russia as an example, stating that although the sanctions are aimed at Russia, the US European allies have suffered serious harm and are facing increasingly high living costs. Especially Germany, the United States has always hoped that Germany will reduce its energy dependence on Russia. Now, due to sanctions against Russia, Germany has reduced its dependence on Russia, but is facing high inflation and economic stagnation.
Zhang Hong believes that conducting geopolitical risk consultation and recruiting professionals or composite talents with international relations and diplomatic backgrounds to provide strategic advice to enterprises is an adjustment for enterprises to adapt to market changes. The internal adjustment and reallocation of costs by enterprises may not necessarily increase overall operating costs.