Keep calm and carry on is the key message on Brexit – but don’t let it distract you from the wider geopolitical risks that could impact your organization.
That’s the view of Rear Admiral Chris Parry, a former Royal Navy Officer, now a geopolitical strategic forecaster and best-selling author. He shared his insights during a recent Thomson Reuters live broadcast on how geopolitical uncertainty can affect your organization.
On Brexit threats for businesses in 2017
Chris Parry: At the end of the day, we will have a Brexit across Europe and in the United Kingdom that people will put up with, whether that’s amongst the political elite or amongst the people generally, and I think it’s pretty useless to talk about hard, soft, medium Brexits. It really doesn’t help the issue. When it comes down to it, Brexit will be achieved by politicians compromising in all sorts of ways.
For businesses, the advice I give to all businesses in the United Kingdom and in Europe is: steady as she goes. Don’t make any major investments, do not make any major changes in what you do because however you think Brexit might turn out, it won’t be that way.
We saw recently how UK Prime Minister Theresa May’s snap election – which saw her party fail to win an overall majority – weakened her hand and further muddied the waters over what post-Brexit trading arrangements will look like. Even though formal negotiations are well underway, key areas such as access to the single market and free movement are unlikely to be clarified for some time. Trying to anticipate the exact impact of Brexit could, therefore, be challenging as the process is so complex and ever changing. Peter Thal Larsen, EMEA Editor, Reuters Breakingviews, echoes this sentiment, believing that although most CEOs have an assumption about how things will play out in terms of Brexit, they will just continually reassess the situation as it develops.
News sentiment and uncertainty post-Brexit
TRMI Country Index: UK uncertainty
Although some commentators fear that Brexit may have a severe impact on the financial services sector, others are less hawkish. Andrew Bailey, chief executive officer of the Financial Conduct Authority (FCA), provided some assurance at a recent Thomson Reuters Newsmaker event (Brexit: What matters for financial services) by arguing that: “If there is a commitment on all sides that the UK and the EU maintains substantially equivalent regulatory arrangements in future, it will not be necessary to restrict open markets and free trade in financial services and therefore not necessary to limit the freedom of firms on location. And therefore, I see no reason why we should sacrifice open financial markets and free trade, as an inevitable response to Brexit.”
Given the divergence of opinion and possible outcomes it’s counterproductive for organizations to try and anticipate the exact outcome of Brexit and by doing so organizations could be missing the bigger global risks.
On political threats to businesses in 2017
Chris Parry: I think your risks are greater in the wider world, given the current geopolitical situation, than they are within Europe. So the answer is, sit on your risks in Europe, mitigate them as best you can, but actually look at what’s coming up on the blind side in the wider world, because they have a greater capacity, as I said, to influence you than those that are happening as a result of Brexit.
In our live broadcast, Chris Parry discusses a number of geopolitical risks: from the rise of populism and nationalism to fake news and trade tariffs by stealth. A shift in U.S. foreign policy is crucial to geopolitics, he believes, describing how the U.S. has gone from being the world’s “sheriff” to a more hands-off approach, which encourages key countries to take the initiative themselves, only calling on the U.S. “cavalry” as a potential back-up. Looking further East, he sees China’s huge infrastructure investment in the South China seas having a potentially significant impact on the future of free maritime trade. But, whatever the specific example, he believes that there is a clear pattern ahead: greater geopolitical uncertainty, complexity and volatility.
The well-informed and prepared organization is not only better shielded from geopolitical risks, it is also strongly positioned to seize the opportunities available in a rapidly changing world.
Managing political risk in international business
Thomson Reuters is strongly positioned to help navigate decisions in this turbulent environment. We offer both quantitative and qualitative data, news and analysis, and the tools you need to support board level decision making:
- Reference data associated with deals, company and markets information
- Thomson Reuters World-Check risk intelligence for identifying heightened risk individuals and entities
- Customized online compliance training courses designed to fit your organization’s unique needs
- Impartial coverage from Reuters News where more than 2,500 journalists around the globe report over 1.5 million news alerts and 2.5 million unique stories per year.