Industry

24 MAR 2022

GLOBAL EVENTS DEMONSTRATE YET AGAIN THE IMPORTANCE OF STRATEGIC RISK MANAGEMENT

The war in Ukraine and its global ramifications are a timely reminder for businesses to undertake a high-level review of risk and to monitor and manage it on an ongoing basis, says Clare B Marshall.

Pre-2019, many commentators predicted that one day another killer virus would cause global turmoil.  When that time came, many countries, governing bodies and organisations did not have comprehensive risk strategies in place to respond quickly, effectively and safely.  

We have since learnt hugely about responding to a global pandemic, with thankfully many positive outputs to balance the negative impacts. Embarking on 2022, we were presented with a year where we might begin to put the pandemic behind us, renew and rebuild. 

Whilst adapting to a new ‘normal’, it was also important to consider what the next major challenge was likely to be. What could be on the horizon and what protection measures should be on business radars? 

A deadly challenge with global ramifications

We hardly had time to draw breath before the next black swan arrived with Putin’s brutal tanks rolling into Ukraine, potentially creating the deadliest and starkest challenge since the end of the second world war – and one with ramifications across the globe. 

As I write, Russian aggression is stalling and talks with a focus on peace are ongoing. We all wish for a swift conclusion to the crisis, immediate halt to the bloodshed and a move towards reuniting Ukrainian families and rebuilding their homes and cities. As someone may have once said, “blessed are the peacemakers”. 

For business, the crisis underlines the importance of strategic risk management. To sustain any business there is a need for strategies and processes - and for high-level review, monitoring and management of risk on an ongoing basis. How many Infrastructure Intelligence readers had a third world war on their risk register? How many had closure of their Russia operation? Expect the unexpected. Plan for the worst. 

As we approach the end of the first quarter of financial year 2022, a focus on preservation and growth of economies is essential, as is the need to keep the wheels of business and trade spinning through these times of extreme crisis. 

Help is available for businesses

Perhaps more importantly is the continual scrutiny of evolving sanctions and other trade rules impacting global business. Help and advice on these matters can be found from a variety of sources including the government website and 2MPy has also created a checklist of key considerations related to general trade and UK regulations.

Businesses should pay particular attention to their existing client base or those they are planning to work with in the future. This should go as far as scrutinising the integrity of their ultimate parent company, beneficial owners and other project stakeholders. Take care when agreeing to provide a parent company guarantee or bond as these could be impacted by sanctions regimes. 

 Photo: Daniele Franchi on Unsplash.

Your legal team, or an advisor, can offer guidance about any special provisions which may be required in contracts to address the impacts of sanctions. They can also provide advice on the risk of new sanctions and your project entitlements and obligations should the events of hostile acts or war impact on project performance. 

Consider talking to your bank about any specific requirements you need to be aware of and maintain a high level of awareness of any entities potentially falling under the umbrella of the multiple sanctions in play. Sanctions are singling out Russia, but many other countries continue to be drawn into various sanctions regimes. 

President Volodymr Zelenskyy and his wife Olena have been applauded for their leadership and resilience during the conflict. They’ve also been praised for their use of social media to communicate with their nation and to share details of the atrocities in Ukraine with other nations. 

The increasing importance of cyber security

Whilst social media is being put to positive use in many areas, behind the scenes warfare is also being carried out in cyber-space, making cyber security a critical area of risk for many businesses.  It’s therefore important to review your arrangements for mitigating cyber attacks and be clear of any legal requirements to put special measures in place. 

One of the biggest concerns during any time of conflict or an extreme event is insurance. Seek professional opinion and understand how your insurance policies come into play in the event of sanctions; both at the stage of renewal and during the lifetime of the policy, if seeking to make claims. Be mindful that payment by an insurer against a claim could be adversely affected if the payment were considered to be unlawful under a sanctions regime. 

And finally, rest assured that by following a robust due diligence process you will be taking steps to minimise risk. Document outcomes and decisions from reviews in a system which is compliant and capable of future reference or potential audit. 

Whilst these words are all theoretical, action can be taken quickly and easily.  It’s not quite so easy for the people of Ukraine to rebuild the lives they’ve left behind. However, this community is best placed to lead the way and champion their corner. 

Notwithstanding the uncertainty, the time is now to begin planning the rebuilding of Ukraine.

Their government already has this underway, but whilst talks continue it is critical that leaders in infrastructure design and development, indeed all those involved in the built environment, collaborate globally and identify ways to support Ukraine’s rebuild strategy. 

In delivering the strategy, the aims should include collecting know-how, feeding this back and learning lessons. This all to ensure - in the unfortunate situation of a similar future event - we are ready to respond with sound starting principles and mitigations. Strategic risk management at its best.   

Clare B Marshall is the founder of the business consultancy 2MPy

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