The importance of addressing geopolitical risk
While leaders are increasingly focused on political and geopolitical risks, they’re less confident in their ability to manage it: More than 90% of executives said their company had been impacted by unexpected political risks in the past 12 months in a 2021 EY-Parthenon survey.² That same study found that about a third of leaders were surprised by emerging political risks nearly half the time — meaning that when it came to successfully identifying events impacting them, the path forward was nonexistent.
To help mitigate the impact of geopolitical risk, it’s important for leaders to first understand what that impact could look like.
Depending on the circumstances, a company may have to consider how political scrutiny affects its business operations and supply chain. The COVID-19 crisis, for example, demonstrated that proactive geopolitical risk management is critical to maintaining enterprise resilience. Leaders may also need to address the potential reputational risks and assess the impact on their financial markets and investment decisions.
In these types of situations, measuring geopolitical risk can help companies be proactive in preventing any negative outcomes and navigating their next steps. So how can companies measure this? Enter: high-frequency geopolitical data.
What is high-frequency geopolitical data?
High-frequency geopolitical data is the daily measure of public opinion regarding world leaders, elections, politicians and policy issues. Companies use this data to navigate the changing geopolitical landscape and assess political risk to inform their own business strategies. Leveraging this data helps answer questions such as:
- Did China view Russia more negatively after its state media reported on the country’s atrocities in Ukraine?
- Do U.S. voters support White House outreach to dictators to achieve lower gas prices?
- If consumers in major global markets want a greener climate, do they expect companies to pay for it?
The factors that go into making such decisions are infinite, but one of the most critical is understanding the current political and regulatory climate.
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