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Corporate strategy and development

The impact of geopolitics on corporate success

Leon Saunders Calvert  Global Head, Capital Markets and Advisory

Leon Saunders Calvert  Global Head, Capital Markets and Advisory

The impact of geopolitics on corporate success or failure has become a key area of debate in light of major events such as Brexit, the deteriorating relations between the members of the Gulf States, the rise of the Trump administration, as well as the prominence of “patriotic hackers” in Russia and the pervasiveness of fake news.

Former Royal Navy officer Rear Admiral Chris Parry, now a geopolitical strategic forecaster and best-selling author, shared his insights during our live broadcast on how geopolitical uncertainty can affect organizations.

In the first piece of a special five-part series on how geopolitical risks can affect your organization and corporate strategy, we discuss the prominent issue of fake news. With “fake news” alleged to have played a key role in major events such as Brexit and President Trump’s road to the White House, how can companies operate successfully in a world where fiction can seemingly win over fact?

Leon Saunders Calvert: We hear a lot about fake news. What impact could this have on mitigating geopolitical risk?

Chris Parry: Yes. I mean, I think that’s a very good question. Can I say that we’ve had fake news forever. Every country puts out propaganda of some sort. It’s just that I think because of social networking, because of social media, because of the way in which we communicate with each other now, it’s much more pervasive and we’re affected more by it.

In the war against “fake news”, Chris believes a cornerstone of sound, forward-looking decision-making is access to trustworthy information sources. Otherwise, companies must “forage for reality” in a social media-driven world where emotional reaction can overpower intellectual reason. He warns the pull of online media means even the most trusted governments and institutions use information to shape the agenda and influence opinion rather than telling it straight.

Strategic forecaster Chris Parry explains the past and present of fake news.

He also stressed that numbers and hard facts are unlikely to be enough, calling for companies to make sure they have access to qualitative as well as quantitative data. This is because as geopolitical uncertainty increases – from the rise of nationalism in Europe and the U.S. to complex and shifting alliances in the Middle East – it’s vital that corporate boards build awareness of how those changes could impact their strategy. That requires not only factual information, but insight and understanding to recognize the future context in which an organization will operate and what impact this will have. If companies don’t test their strategy against potential dangers and opportunities they risk it veering off course, no matter how well it has been planned from a purely business perspective.

There is evidence that boards are not doing enough in this respect. A recent survey by global management consultancy McKinsey showed that although 84% of executives believe geopolitical instability will have an important or very important impact on their global business, only 13% have taken any steps to address this in their corporate strategy.

Geopolitical instability impact on global business statistics from the McKinsey & Company survey.
Source: McKinsey & Company survey, 2015

The first step is to get access to the right information – and this is where Thomson Reuters is strongly positioned to clear the air of questionable and misleading news. In addition to our wealth of referential data and analytics, with a network of 2,600 journalists across the world, Reuters provides an independent and impartial news source to over one billion people every day.

We are also developing new services aimed specifically ferreting out the most accurate information. Reuters News Tracer uses our proprietary algorithm to find news events that are breaking on Twitter and evaluates their veracity. Essentially, Reuters News Tracer asks critical questions, consults historical data and weighs relevance just like a human would, but all within 40 milliseconds, making it easier to divine  “fact” from “flawed.”

Parry: It’s always been my instinct, whether it’s been in combat or in business or anything, is that how humans operate? Does that sound right, because if it doesn’t sound right, it probably isn’t. It’s as simple as that. But sources of data… You know, Thomson Reuters, right at the heart of this, is actually making sure that its data and its sources are absolutely pure. Not everybody is scrupulous in that regard.

Armed with the right data and insight to help you build a clear picture of the future context in which your strategy may operate, the next step is to move the issue onto or further up the board agenda. Test your strategies against what Chris calls the “cone of futures: probable, possible and plausible,” to see how your strategy stacks up. But remember, this is not purely a defensive play. Those with the sharpest insight will also be the best positioned to see the opportunities and strike.

Learn more

To find out more watch the full broadcast.

To learn about how we can provide the data, analysis and tools you need to drive your corporate strategy, click here.

Geopolitical Insights: Actionable insights for more effective short and long term strategies.

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