Luxury goods industry: share performance informed by geopolitical risk awareness

Geoeconomics: the new context for doing business in the world

The challenge for corporations will be determine how political and geopolitical risks are going to affect the way in which they operate across fragmenting jurisdictions, how they drive market access, the preferences and purchasing powers of consumers, what threats they pose to supply chains and business continuity, branding and reputation, or corporate governance.

Investors will need to systematically factor in geopolitical risks in their investment decisions, their preferences for asset classes, ideally resulting in geopolitical risk adjusted investment portfolios. They need to ensure that they give preference to those who have a strategy to deal with political uncertainty, and factor in the political risk exposure of those who don’t.

See here our short note on the subject.

Getting serious about political risk management

What has become increasingly clear is that a responsive, reactive approach to political risk management is only a second best way to deal with political risk. A much more promising approach is it to deal with political risk in a proactive, strategic, and comprehensive manner. It has therefore become essential for businesses to thoroughly examine how political risks could compromise market access, supply chains, production processes, financial bases, human resources or corporate governance. What has turned out to be increasingly useful is to maintain a corporate-wide perspective of political and wider economic and market risks in form of a political and economic risk register. A political and economic risk register enables them to develop a political risk hierarchy, more strategically allocate resources, build a system of controls, and increase overall resilience.

In order to learn more about how to establish and maintain a political and economic risk register, please contact us.