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Geopolitics in the boardroom: A discussion from the Nordics

Drawing insights from a recent event in Copenhagen, we consider how boards can react to the geopolitical turbulence which continues to remake our world around us
September 2023

2023 finds the global kaleidoscope shaken, the pieces in flux. But the tumult extends beyond even Russia’s invasion of Ukraine. Ours is a horizon also reshaped by rapid technological advances, the lingering repercussions of the pandemic and climate change — to name a few.

No country, nor business organisation, has proved immune to the sheer prevalence and intensity of such issues. It should come as no surprise then that this intense geopolitical disruption and escalating risk now looms large as a key priority in boardrooms around the world.

As my colleague, Claudia Pici Morris, has rightly argued, boards must now proactively monitor the geopolitical risks on the horizon, understand the implications of those risks and plan for how to handle them. Understanding what path to take, however, remains open to question.

Different boards react in different ways and there is no guarantee of success — seeking to integrate geopolitics into corporate strategy and boardroom decision making is one thing, actually achieving it is something else entirely.

In such challenging circumstances, it would be perfectly understandable for business leaders to prioritise mere survival. But at the same time, it would be remiss not to pursue new opportunities for growth and performance gains. These not only serve as important motivational fuel but, if seized, will help ensure that tomorrow’s board members will face an easier geopolitical environment than the current incumbents.

A recent event in Copenhagen, the ninth in an annual series co-hosted by Spencer Stuart, WomenCorporateDirectors and law firm Kromann Reumert, attracted 120 participants, including 20 chairs and senior executives. This distinguished group, who represented a variety of different industries and companies, as well as a broad cross section of Nordic businesses and internationals, gathered to examine the challenges and opportunities presented by the complex geopolitical landscape. There was much to discuss.

This year’s Global Risks Perception Survey by the World Economic Forum ranked “geoeconomic confrontation” as number three among the top ten identified risks over the next two years. This means that the need to incorporate geopolitical insights into the boardroom has become ever more important — a fact underlined by every chair in attendance confirming that they now spend more time discussing geopolitics in the boardroom in a structured manner.

One of the most internationally recognised Danish business leaders — his current roles include serving as chair of the of the Supervisory Board of Siemens AG — Jim Hagemann Snabe used his speech to range widely over the current geopolitical environment, arguing that effective leadership is rooted in responsibility and courage, rather than power for its own sake.

Discussions also focused on how we are now at an inflection point, one that should help bridge differences, strengthen collaboration and help create global solutions for global problems. While greater collaboration encourages greater dependency between nation states, reduced collaboration increases the risk of further conflict.

Business leaders were urged to add their voices to the public arena as these issues can’t all be left to politicians. However, against the backdrop of the energy transition towards net zero, there was also a general sense of optimism that was shared by many of the panel chairs. This feeling is perhaps rooted in the knowledge that many Nordic companies have made great strides in this area and view the environment and ESG more broadly as an important business opportunity.

Boards are mandated to promote the long-term success of their company and, amongst many other things, meet their countless responsibilities to shareholders and stakeholders. Today, though, they will be unable to meet these objectives unless they also prioritise the issue of risk, both in their discussions with senior colleagues but also throughout their organisation.

To illustrate one practical example, one of our panellists drew attention to a company’s supply chain. A company should now be looking to diversify these operations across multiple countries in order to spread the risk, ideally choosing those nations which have an adherence to democracy — rather than becoming overly reliant on countries that have vastly different values and approaches.

We also heard from panellists that board members should be “paranoid” and try to “look around the corner at all times” to spot any lurking risks and dangers. This means that boards need to become well versed in ‘what happens if?” scenarios, which requires them to undertake detailed risk assessments, in order to map and consider issues from every angle.

Understanding the complexity of these issues, and identifying the right approach in fast-changing circumstances, requires boards to be able to pivot quickly when a crisis happens, while also surrounding themselves with a diversity of opinions, knowledge and perspectives.

In other words, they need to be able to tap into experts on subjects ranging from generative AI to ESG to macroeconomics. This approach is applicable for companies of all sizes — smaller organisations, for example, are by no means immune to geopolitical shifts by virtue of their reduced footprint.

This means that the boardroom door should always be left open to guest speakers who can share their expertise, while the composition of the board itself should be as diverse as possible. In particular, boards need to do more to ensure they include and appoint them women. In Denmark, women make up about 40 percent of board members in the top 25 stock listed companies, but the picture at the executive level and in smaller, unlisted companies is very different.

We are experiencing a critical time of transition, one that is expected to continue for the foreseeable future. As we seek out calmer waters, business leaders have a significant responsibility — and opportunity — to shape the future of their organisations and the world.