Board oversight of geopolitical risk

Geopolitical events can quickly disrupt operations, supply chains, and market access, posing significant risks to business continuity and growth. By actively monitoring and understanding these risks, boards can help guide management in developing robust risk mitigation strategies, adapting to regulatory changes, and seizing opportunities that arise from global shifts. Effective oversight can help position an organization to more proactively address emerging challenges, safeguard their strategic direction, and capitalize on emerging opportunities in an increasingly volatile environment.

This Board Practices Quarterly is based on a recent survey of members of the Society for Corporate Governance, representing public and private companies. Among the areas covered in the survey were the primary geopolitical risks companies are focused on, management responsibility, how the risks are included on board agendas, board oversight structure, and ways in which companies are mitigating and/or managing these risks.

Noteworthy findings

Respondents, primarily corporate secretaries, in-house counsel, and other governance professionals, represent 85 public companies and 21 private companies of varying sizes and industries¹, and the findings pertain to these companies. The actual number of responses for each question is provided. Some survey results may not sum to 100% as questions may have allowed respondents to select multiple answers.
 

Public company findings

Indicate which of the following geopolitical risks your company is currently most focused on. [Select up to three] (83 responses)

The top two geopolitical risks reported by both large- and mid-caps, as well as private companies, were 1) evolving global trade policy and supply chain disruptions and 2) cyber incidents. Rounding out their top three was political instability and fragmentations for large-caps, and technological disruption and competition for mid-caps and private companies.Responses for “Other (please specify)” were: financial market volatility, regulatory fragmentation, global confidence in US as a trading partner, crisis management, employee safety, workforce crisis, and immigration policy. 

Which board committee has primary oversight of geopolitical risk?
(77 responses)

While large-caps and mid-caps are comparable in terms of their allocation of primary geopolitical risk oversight to the full board (21% and 22%, respectively), variations across committees include allocation to the audit committee (reported by 18% of large-caps and 31% of mid-caps) and allocation across multiple committees (reported by 38% of large-caps and 31% of mid-caps).

How does your board stay educated and informed on various geopolitical risks? [Select all that apply] (75 responses)

Both public and private companies report that their boards utilize various mechanisms to stay informed on geopolitical risks with the most common being internal updates and deep dives. One notable difference between market caps is that 50% of large-caps engage outside advisors and subject matter specialists to provide periodic briefings compared to 35% of mid-caps.