Page 42 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) 23062 COPY.indd

BFSI Chronicle, 2 Annual Issue, 10 Edition July 2022
th
nd
currency restrictions to conserve their reserves of energy and rare earth material have the
of hard currency. With persisting pandemic potential to adversely impact business
rage, some countries may face political operations.
instability and civil unrest. These would tend to Corruption
escalate risks of investment in the jurisdictions. Discriminatory taxation and prevalence of
Protectionism is now often justified on grounds systemic bribing may act as hindrance to fair
of national security. Governments are also competition and efficient pricing. It can drive
prepared to cut off trade as a punitive tool. the deserving market player out of business
making space for less efficient operators and
Populism, Economic Distress and Regulatory / pampered coteries.
legal Uncertainty
Politically Terrorism
Discriminatory and stringent regulatory Motivated threat and vandalism against person
requirements for foreign firms, restricting and properties tend to make business climate
FDI to protect and favour domestic industry, uncertain and risky.
change in foreign ownership rules, taxation and
environmental regulations may be classified Cyber threats
under this heading. Threat or destruction of intellectual property
rights, espionage, extortions, and massive
Internal Confl icts
disruptions of companies, industries,
Social unrest, ethnic violence, migration, governments, and societies may be classified
nationalism, separatism, federalism, civil wars, under this heading.
coups, and revolutions are recognised sources
which also tend to escalate the geopolitical Approach to Managing Geopolitical Risk
risks adversely impacting the investment Effective geopolitical risk management needs
climate and sentiment. four basic competencies viz., understanding
risks, analysing risks, mitigating risks and
Human Rights Violation
responding to crisis. Organisation need
Operations in countries with poor human rights consider its own risk appetite and ensure that
records can cause supply chain disruptions and there is shared understanding thereof across
can also lead to reputational damages and give the organisation.
rise to class action lawsuits, public boycotts
or stockholder divestment campaigns. Many Ensuring collection and dissemination of
governments have introduced laws requiring good and relevant information about the
companies to take actions to mitigate the risk geopolitical risk facing the organisation would
of adverse human rights impacts. form the basis for sound analysis of the risk.
Good risk analysis challenges assumptions and
Social Activism
intuitive models about likely manner in which
Events/opinion going viral, facilitating it might unfold for better preparedness of the
collective action have the potential to escalate organisation. To start with most valuable assets
geopolitical uncertainties and risks. and most vulnerable assets having exposure
to geopolitical risks may be listed. Greater
Natural resource Manipulation
the convergence of these two lists the higher
Politically motivated changes to the supplies

The Institute Of Cost Accountants Of India

42