Whether pursuing new customers in global markets or managing far-flung supply chains, the ability to react effectively to political developments through geopolitical intelligence can be increasingly seen as a core business competency.
"The rise in geopolitical risk has been the dominant theme for the global economy in 2016 and 2017," says Joseph Lake, global director of research for London-based The Economist Intelligence Unit. He and other purveyors of geopolitical intelligence report booming business in providing regional and country-by-country analyses of government policies, regulatory changes, economic forecasts, political outlooks and more.
The Risks of Faulty Geopolitical Intelligence
Geopolitical intelligence's objective is to help businesses manage risk and make better decisions about which markets to enter and which allies to recruit.
"We often will be hired by companies who would like to know more about their joint venture partner," says Betsy Blumenthal, senior managing director for New York-based Kroll, which provides intelligence for risk management on companies and countries around the world.
An American business partnering in a frontier economy can unwittingly ally with someone subject to sanctions for dealing with outlaw states, trafficking in endangered wildlife and other violations rarely encountered domestically. At the same time, American firms are subject to U.S. laws—such as the Foreign Corrupt Practices Act (FCPA), which forbids bribery—that may come into play if they choose the wrong partner.
—Rodger Baker, vice president of strategic analysis, Stratfor
"On the one hand, they want to be sure they are well-positioned to be a good partner," Blumenthal says. "On the other, they want to make sure they aren't so well-connected with the current government that it would cause FCPA concerns."
Missteps due to incomplete or inaccurate intelligence can incur catastrophic costs, ranging from regulatory fines to criminal charges to nationalization of private industry following a regime change. "For reasons having nothing to do with their product or service, they might be in a no-win situation and never should have invested the time or energy to consider opening up a facility there or partnering with somebody," Blumenthal says.
Reputational risk is another consideration. There's even the possibility that a business may unwittingly fund harmful illegal practices. "These things have human consequences," says Sneha Shah, managing director for Africa with Thomson Reuters, in Johannesburg, South Africa. "It's not just that you may be flouting a regulation."
Getting Started in Geopolitical Intelligence
Developing intelligence sufficient to help businesses make sound decisions in murky situations can involve much more than casual study. "An internet search isn't good enough," says Shah. Businesses often start by tapping public sources, however.
"Keeping abreast of regional and global geopolitical trends via reading reputable news sources and long-form reports is perhaps the most immediately effective way for organizations to begin compiling geopolitical intelligence," says Jon Condra, director of Asia Pacific research for New York-based Flashpoint, which specializes in intelligence sourced from "the Deep Web," which is a part of the Internet not indexed by major search engines, and "the Dark Web," a part of the Internet accessible only with special software.
To go deeper, intelligence offices employ staffs of experts in the languages, histories, cultures, laws and business practices of different countries. "Most organizations lack the internal expertise to obtain and analyze native language sources and documents from a multitude of key countries and regions around the world," Condra says.
Large global enterprises may create in-house geopolitical intelligence functions, perhaps as part of a risk management department. Smaller companies are more likely to use outside services, often sold by subscription. Fees for intelligence reports can come to many thousands of dollars for an in-depth custom assessment of a multi-country region. At the low end, a few hundred dollars may buy a one-time report on a single nation or industry.
For the money, third-party services can offer intelligence customers the benefit of frequent updates, specific expertise and broad scale. "In Africa, we have over 385 people covering the continent," Shah says. "It's very hard for a small to medium-sized enterprise to replicate that."
The Limits of Geopolitical Intelligence
Whether do-it-yourself or purchased from a major provider, geopolitical intelligence is only as good as the information it is based on. "With regards to limits, predictions are notoriously difficult and when dealing with nation-states, analysts must take into account the possibility of denial of access to pertinent information or intentional deception," Condra says.
Internally, businesses can face challenges justifying the cost of buying geopolitical intelligence. "It may not be a clear return on investment but it may have prevented loss expenditures," says Rodger Baker, vice president of strategic analysis for Austin, Texas-based geopolitical intelligence firm Stratfor. "It's always harder to measure what you didn't lose than what you did gain."
Even if global political instability eases, geopolitical intelligence firms anticipate growing demand for their services. Rapid technological change and increasingly interconnected economies can expose even local businesses to effects of future events occurring as far away as the other side of the world, Baker says. "Geopolitical intelligence, by taking a broad holistic and even global view, can start to view some of the changing opportunities and risks much further ahead," he says.
Read more articles on research.
Photo: Getty Images
The information contained herein is for generalized informational and educational purposes only and does not constitute investment, financial, tax, legal or other professional advice on any subject matter. THIS IS NOT A SUBSTITUTE FOR PROFESSIONAL BUSINESS ADVICE. Therefore, seek such advice in connection with any specific situation, as necessary. The views and opinions of third parties expressed herein represent the opinion of the author, speaker or participant (as the case may be) and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions. American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any such opinion, advice or statement made herein.