REPRISE: Top Risks and a Turbulent Spin-Out in 2022
A Conversation Between Christopher P. Skroupa, Skytop Editor-in-Chief, and Jonathan Wood, Deputy Global Research Director, Control Risks / February 8th, 2022
Jonathan Wood is Control Risks’ lead analyst for the United States and Canada, as well as the Deputy Global Research Director, providing analysis and consultancy on political, operational, security and integrity risks to multinational organizations in the oil and gas, mining, insurance, financial services, retail, construction and technology sectors. Jonathan’s subject matter expertise encompasses geopolitics, global governance, economic development and transnational security issues.
Prior to joining Control Risks, he evaluated multilateral development bank procurement policies for a consultancy based outside of Washington, DC, and worked on defense sector integrity issues at Transparency International in London. Jonathan also previously worked as an analyst and organizer for leading US food security organizations based in Washington, DC, and Boston (United States).
Jonathan graduated magna cum laude with a BA in History and Literature from Harvard University and completed an MSc with distinction in Global Politics from the London School of Economics (LSE), focusing on globalization, international relations, and global energy security.
Christopher Skroupa: In 2022, the world will be reshaping due to nations and companies repositioning. Can you walk us through what is meant by this and why boards, management and institutional investors need to know this?
Jonathan Wood: The pandemic is accelerating the shift to a more multipolar world, where both countries and companies must triangulate amid escalating great power competition. At the same time, governments and companies are re-considering global supply chains, especially for critical goods. Companies need to begin actively managing geopolitical risk. This means mapping their exposures and vulnerabilities in detail and using scenarios and monitoring to plan responses to a wider range of contingencies.
Christopher: How has the COVID-19 pandemic set the table for global security in 2022 and what should company leaders be most sensitive to addressing in their jurisdictions?
Jonathan: Economic disruption and dissatisfaction with government performance during the pandemic are driving social unrest, especially in Latin America. Persistent supply chain disruptions amid a rapid economic recovery, meanwhile, are driving up the cost of living and eroding recent middle class gains worldwide. Meanwhile, social dislocation and political polarization over public health measures – lockdowns, vaccines – is stimulating both social unrest and violent extremism, often fueled by online misinformation. Companies should re-evaluate security threat landscapes, assess the security implications of dispersed or hybrid workforces, and closely monitor evolving insider threats.
Christopher: The Biden Administration has submitted that the Taliban takeover of Afghanistan will not have a significant effect on the world. Do you agree?
Jonathan: The Taliban takeover of Afghanistan is already having a significant global impact by underscoring a shift in US strategic priorities from the Middle East towards Asia (and, at the moment, Europe). The nature of the US withdrawal from Afghanistan also frayed relations with partners and allies, and exposed the limits of US power. The humanitarian situation in Afghanistan has worsened. Security implications so far are relatively contained, but the Taliban takeover could allow transnational terrorist groups to (re)gain a foothold in the coming years.
Christopher: Hostile nation-states, terrorist groups and organized criminal syndicates seem to have upped their game when it comes to targeting companies to secure capital to achieve their strategic objectives. What do you see playing out with this?
Jonathan: Despite elevating cyber attacks to the level of a national security threat, governments are not deterring critical risks to business. Quite the contrary: several are actively cultivating direct or indirect partnerships with cybercriminal actors. As a result, the proliferation of sophisticated capabilities continues, exposing more sectors, assets, and types of information to compromise. With cyber diplomacy in tatters, the burden in 2022 is increasingly on companies themselves to detect, prevent, and respond to cyber attacks – and understand how geopolitical competition could influence the timing and targeting of cyber attacks.
Christopher: Climate change seems to be disrupting companies’ abilities to plan and manage risks. What do you consider to be the primary impact of climate change on companies?
Jonathan: Many companies today are impacted by rapid regulatory change and increased shareholder and stakeholder scrutiny of their environmental performance and business models. Going forward, more companies will also be impacted by operational and supply chain disruption stemming from climate-related disasters. Companies in 2022 need to evaluate and prepare for climate change by setting appropriate performance targets, updating and incorporating natural hazards into risk assessments, and reviewing (or preparing) disaster recovery plans.
Christopher: It seems that companies are now seen as the solution to environment, social or other issues that have historically been the responsibility of the government. Is this a slippery slope?
Jonathan: Rather than displacing governments, companies’ environmental, social, and governance (ESG) commitments are helping them with the expectations of their stakeholders and shareholders, including local communities and regulators. This forms a key part of how companies can manage their legal, regulatory, reputational, and operational risks. Climate sustainability, for example, seeks to make companies (and their business models) more resilient to the regulatory and market dynamics of the energy transition. The next few years will be critical to making investments in personnel, technology, and tools to set, measure, and monitor commitments.