In this article we describe a framework for financial institutions that wish to manage geopolitical risks attached to their global investments. We define geopolitical risk management as identifying, assessing, and mitigating risks from political, economic, and social events (e.g., conflicts, sanctions, trade disputes or international supply chain disruptions) that could affect financial performance.
The management of geopolitical risks is done by building scenarios and a forecast. A forecast is a forward-looking analysis of a particular issue that incorporates data inputs – such as open-source news monitoring, quantitative research, or primary sources from the field – within a strategic analysis context, one which analyses the strategy and decision-making process of relevant actors.
We will introduce the 6-step geopolitical forecasting framework that shows the risks affecting financial performance.
In addition, the article explains the external supervision on the management of geopolitical risk by the Dutch Central Bank and the challenges this supervision faces.
in VBA Journaal door Eugene Chausovsky and Onno de Lange