Geopolitics has climbed up the corporate agenda, becoming a top priority for boards. Around the world, political, economic and social uncertainties can impact every aspect of a company’s operations, as well as lead to potentially significant changes in financial, regulatory, and legal environments. Moreover, a climate of armed conflicts, cyber-attacks, trade disputes, and economic realignments can increase economic fragility and potentially undermine trust in institutions and data. The result – members of boards of directors and company officers are having to navigate their organizations through incredibly complex risk scenarios that did not exist a few years ago.

Shocks such as conflicts, political instability and trade barriers create wavelike effects across industries. Ongoing geopolitical instabilities expose companies and their management to an array of complicated operational, financial and reputational challenges, which can have enormous potential to result in corporate and securities litigation. For example, companies may face increased scrutiny for non-compliance with international sanctions regimes or a failure to observe changes to legal and regulatory frameworks in the different territories of their operations. Directors and officers (D&Os) can be held accountable for misjudging the impact of geopolitical developments on their company’s operations or failing to control and adequately adapt to the legal or regulatory requirements in different countries. Liability for D&Os may arise from shareholder lawsuits or regulatory penalties directed both against the entity and individual decision-makers.

Geopolitical intelligence and business impact analysis need to become integral parts of organizational risk management and strategic decision-making, as well as supply chain and cyber risk management. Systematic monitoring of global hotspots and scenario-based planning are essential.

Cyber emerging as a major cause of claims against D&Os

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