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Risky Business: Why companies must insulate against rising geopolitical threats

In an increasingly globalised world, there is a need for companies with global presence to build strong connections with local communities to help insulate them to the extent possible

Relations between nations and the geopolitical forces that impact businesses have become more pronounced and difficult to ignore Relations between nations and the geopolitical forces that impact businesses have become more pronounced and difficult to ignore

The beheading of a French teacher on October 16 for showing cartoons of Prophet Muhammad during a class in a Paris suburb has triggered off a chain of reactions that have culminated in a call for boycott of French companies and brands in many Muslim-dominant countries.

The publication of cartoons of Prophet Muhammad by the French satirical publication Charlie Hebdo are at the heart of the controversy. Back in January 2015 these cartoons sparked anger in numerous countries and a terrorist attack at the newspaper in which 12 people were killed.

French President Emmanuel Macron underlined France's commitment to free speech and vowed to take the fight to Islamic radicals. "We will not give in, ever. We respect all differences in a spirit of peace. We do not accept hate speech and defend reasonable debate. We will always be on the side of human dignity and universal values," Macron tweeted.

Also Read: Hashtag 'Boycott French Products' trends in Muslim countries; here's why

But his comments have not gone down well. There have been large-scale protests in many Muslim-majority countries and Turkish President Recep Tayyip Erdogan called for a boycott of French goods and suggested Macron needed a mental health check. France recalled its envoy in response to the slight.

Protests have since erupted across many countries with calls for boycott of French goods gaining ground. The calls for the boycott spread rapidly on social media with the hashtag #BoycottFrenchProducts  and #BoycottFrance trending on social media. Lists of French companies and brands with global footprints have been circulating wildly with calls to stay away from them.

Some Arab trade groups have reportedly begun removing French products from their shelves. Boycotts of French goods are under way in supermarkets in Qatar and Kuwait, with further calls to spurn French products in Jordan and other countries.

India's neighbourhood both Pakistan and Bangladesh have seen protests and widespread support for the ban.

Also Read: India condemns attack against French President over stand on 'radical Islam'

Increasingly geo-political conflicts are impacting businesses. The Indo-China border skirmish earlier this year resulted in many organisations calling for boycott of Chinese goods in India. The strong anti-China sentiment has affected major Chinese brands present in India, with mobile phone maker Vivo pulling out of its sponsorship of the IPL.

Though not a direct nation to nation conflict, US President Trump issued an executive order earlier this year barring US companies from doing business with a Chinese telecom major (Huawei) due to national security concerns.

This not only puts the Chinese firm out of contention for supplying equipment for telecom network infrastructure in the US's 5G roll out, but has also kept it out of many US allies' network roll out plans too.

In August 2019 many angry Chinese buyers boycotted companies that were labelling Hong Kong as a separate entity from China. Companies like Versace, Asics, Coach, and Givenchy were among the foreign brands that posted apologies on Chinese social media after consumers took issue with their merchandise or store locators that listed Hong Kong separately from China, fearing loss of favour in the world's second-largest consumer market.

These instances in the past few years have all brought to the fore the detrimental impact of geopolitics and rising political tensions on businesses.

What should a company do when it faces a boycott through no fault of its own? What can a business do to avoid a boycott that has nothing to do with its products, services or actions? These are questions that are becoming increasingly important.

Many boycotts and attacks on companies have very little to do with the actions or policies of an individual company. Instead they are related to the company's country of origin.

There are many who feel that businesses should not really pay heed to geopolitics since it deals with issues and events that are beyond their control. It also has little or no significance to the everyday operations of the businesses.

Having said that, in recent years, geopolitics has begun to impact businesses far more severely with a globalised world, integrated supply chains and companies' global policies.

Relations between nations and the geopolitical forces that impact businesses have become more pronounced and difficult to ignore.

Already, business schools in Europe and the United States have begun courses that help students understand how the intersection of economy and finance with geopolitical forces evolves and impacts businesses.

Businesses have to be aware and work on mitigation measures when an event or a happening in one part of the world impacts businesses and individuals in other parts of the world.

With social media activism playing a key role in fanning these issues, often based on falsehoods and half-truths, the issues are escalating beyond control and badly impacting businesses.

While geo-political risk mitigation is beyond a company's control, in an increasingly globalised world, there is a need for companies with global presence to build strong connections with local communities to help insulate them to the extent possible.

(The author is a Business Strategist and Angel Investor.)