Sanctions Drive the Need for Compliance Officers to Consider Geopolitical Risk
Boston Consulting Group recently surveyed compliance personnel from 250 companies and the resulting study revealed an interesting development on how organizations are responding to financial and trade sanctions. The study showed that the dynamic sanctions landscape is moving geopolitical risk toward the top of the compliance agenda. As a result, organizations with sanctions risk must up their game by becoming more sophisticated with their response and ensure that their sanctions compliance infrastructure and capabilities are fully aligned with their broader trade compliance frameworks and capabilities.
The growing importance of geopolitical risk is also shaping the boardroom and adding further pressure on companies to take a political stand when it comes to global issues that are shaping the geopolitical landscape. The war in Ukraine has intensified the pressure on global organizations to not only express whether they “Stand with Ukraine”, there is pressure to back that up with concrete steps that go well beyond recognizing international financial and trade sanctions with which they have no choice to comply. Many global organizations have customers, suppliers, and operations in Russia and Ukraine. Is it business as usual or has the company backed up its words with actions that demonstrate that their political stance is meaningful and the organization recognizes that it has taken visible steps to back up their words?
Aside from the importance of demonstrating a commitment to what is right in the geopolitical world, the ever-changing sanctions landscape can lead to significant disruptions in business operations that can and will test an organization’s resiliency and the sufficiency of its crisis management planning and response capabilities. Crisis management planning happens before the crisis occurs. It is a process by which a series of potentially disruptive crisis scenarios are discussed and then followed by leadership determining and then detailing a specific course of action be implemented should the specific scenario become a reality. Considering a crisis in advance allows for swift decision-making and increases the likelihood that the company will be able to successfully navigate the crisis decisively. Decisiveness that would otherwise not be possible without the brainstorming and planning that preceded it.
The key takeaway is BCG’s survey is that organizational resiliency is inextricably linked to geopolitical risk for global organizations and that compliance officers together with other business leaders need to factor it into their crisis management planning. If you’re an executive or compliance officer with a global organization and you’ve never taken part in a crisis management planning session or desktop exercise around a specific crisis, there is no time like the present.