Most of the 420 board members surveyed as part of swissVR Monitor II/2022 believe that geopolitical risks will be important or very important for their company over the next twelve months.
Political or military crises, trade disputes, resource conflicts or climate change: Geopolitical developments are an essential part of the activities of most Swiss companies, as the swissVR Monitor II/2022 shows. However, there are only a limited number of bodies that take comprehensive steps to identify risks and develop scenarios. However, given the current global situation, there is an urgent need to act: Most of the 420 CEOs surveyed believe that geopolitical risks will be important or very important for their company over the next twelve months. A third of them also forecast unfavorable economic developments in Switzerland.
The geopolitical situation has changed fundamentally in recent weeks and months. The war in Ukraine is affecting the whole world, the rivalry between China and the USA is growing and Switzerland’s role in Europe remains unclear. Even the restrictive measures taken in parts of Asia related to COVID-19 and high global inflation have drawn attention to geopolitical risks.
The latest swissVR Monitor shows that while Swiss boards of directors are interested in geopolitical risks, they do little to identify, assess or control them. The survey, conducted by the association of board members swissVR, the auditing and consulting company Deloitte and the University of Lucerne, takes the pulse of board members every semester. Issue II/2022 focuses on geopolitical developments.
Panels predict significant geopolitical risks over the next 12 months
In general, the development of the geopolitical environment is important for the Swiss economy, which is heavily export-oriented and therefore dependent on international markets. In view of the current uncertainties, this key characteristic is tending to increase: 59% of the board members surveyed are of the opinion that geopolitical risks will be important or even very important for their own company in the next twelve months (see chart). In addition, the economic prospects are clouding over: around a third of the 420 respondents forecast unfavorable economic developments for the coming year.
Degree of relevance: What geopolitical risks do you see for your company in the next twelve months?
The vast majority (93%) say their boards generally take action to address geopolitical risks. More than two-thirds of board members (69%) regularly discuss geopolitical developments, more than a third analyze scenarios (39%) or adjust their strategy (35%). The fact that only two actions are taken per board on average suggests that while many boards are vigilant and aware of geopolitical risks, they are not overreacting or leaving management to plan the actions to be taken in light of the uncertainty as the situation unfolds .
“We are experiencing a turning point – not only politically, but also entrepreneurially. New geopolitical realities require a rethink from the executives of many Swiss companies. When making strategic decisions, it is important to take the political situation into account as a new major dimension,” says Reto Savoia, CEO of Deloitte Switzerland.
Geopolitical developments bring with them challenges and opportunities
Current geopolitical developments pose challenges for almost all companies (98%): The most frequently mentioned concern the availability and costs of raw materials and energy (50%) and supply chain disruptions (48%). On the other hand, three quarters of the board members surveyed (77%) also see opportunities in geopolitical developments. These primarily include product and service innovations (34%) and increased efficiency in costs and processes (30%).
Growing challenges in global markets require an increased exposure to geopolitical risk. However, Christoph Lengwiler, lecturer at the University of Lucerne, warns against any form of activism: “In crisis situations, there is a risk that the Board of Directors will take hasty operational measures. However, it is desirable that strategic management remains the priority. The Executive Board must develop scenarios, evaluate options for action and provide impetus. Management must then take concrete action.”
Half of the companies are directly affected by the war in Ukraine
Even if the question of geopolitical developments is regularly asked, seven out of ten board members (71%) were surprised by the outbreak of war in Ukraine and the extent of its economic consequences. Almost a fifth of the executive boards surveyed (19%) state that geopolitical risks in Eastern Europe and Russia have been addressed in risk assessments within the executive boards in recent years. According to the survey, about half of the companies (48%) were directly affected by Russia’s attack on Ukraine this year.
The war in Ukraine forced many companies to take a stand. It is possible that this need will increase in the future: “In the future, companies will increasingly be confronted with the obligation to position themselves. In order to be able to decide for or against a market, in-depth analyzes and strategic decisions by the board of directors are necessary,” Cornelia Ritz Bossicard, President of swissVR, is convinced.
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