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Risky Business: Geopolitics and the Global Corporation

The Responsible Company
Becoming more resilient in the face of globalization’s pressures is not only important for business: It is vital for the national security of the U.S. and its allies. Private-sector organizations operate America’s transportation networks, power facilities, telecommunications and data networks, health-care infrastructure, pharmaceutical supply, and most of the security services upon which critical U.S. infrastructures depend. Furthermore, corporate innovations in software, security, and biotechnology will be essential to win the international campaign against terrorism.

But, in many ways, the recognition that the prevailing market-driven paradigm must factor into geopolitical uncertainty also requires that business take on an entirely new understanding of its purpose in a global society.

More proactive than response strategies to physical threats — and more fundamental than regulation, codes of conduct, and corporate citizenship — is the idea that business is a political and social actor with responsibilities beyond wealth creation. The market itself is an authority in global governance. Indeed, the private sector already embodies the “institutional authority” of the standard-setting power of the market, which has considerable impact on political decision making. This in turn means that corporate activity affects both shareholders and stakeholders, particularly in such policy areas as labor, environment, and intellectual property rights in the developing world. Thus, the role of the multinational in self-regulation and standard setting signifies the entrance of the private sector into the broader normative debates of the era.

This is no longer a radical view. Business leaders from Microsoft’s Bill Gates to Anglo American’s Sir Mark Moody-Stuart have espoused variations on the theme of corporate responsibility as both a moral good and a performance mechanism. The increasingly presumed private-sector responsibility for the stewardship of global public goods lays the foundation for the new “market ethics.” Though such ethics reflect a growing progressive spirit among global leaders, double standards and confused responsibility remain salient features of this ethical tug-of-war between public and private spheres. Business has clearly responded by extending its political management apparatus to negotiate minimal responsibility for public goods management, and at the same time has enhanced social adaptive capabilities through, for example, corporate citizenship programs and improved values communication. But such practices will remain ad hoc until a deeper consensus emerges over a social contract on the sustainable management of the global marketplace.

As Brian Jenkins of the Rand Corporation has observed, “We have spent decades pulling down borders to economic integration, facilitating the seamless transfer of goods across national borders — now the guards and gates are going back up.” The strategic change necessary for business is therefore upstream, not to be confused with corporate citizenship policies to make a positive impact on local conditions abroad. Before companies can consider responsible local engagement in overseas operations, they must understand the risks they face in those markets. Corporate citizenship itself will expand only when MNCs make longer-term commitments to developing-country markets.

Nonetheless, it is self-evident that business is a major beneficiary of peace, the most basic public good. Better investment opportunities, reduced operational costs, and expanded markets constitute the virtuous circle that results from the consequences of peace: reallocation of nation-state expenditure (from military toward social/public goods) and the transformation of international lending and aid (from emergency humanitarian assistance toward development assistance).

Thus an important component of geopolitical risk assessment should be an evaluation of the corporate role itself in either increasing or mitigating risks. Does corporate activity promote or hinder illicit trade in weapons and natural resources, does it enable or curb corruption and graft, does it perpetuate illegitimate regimes or foster good governance? And even in the absence of direct political involvement, can business serve as a voice to encourage government engagement in conflict prevention and resolution, or contribute resources toward efforts to rebuild shattered postconflict societies to get them functioning, consuming, and trading again? In the age of systemic risk, corporations are part of both the problem and the solution.

 
 
 
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Resources

  1. Randy Starr, Jim Newfrock, and Michael Delurey, “Enterprise Resilience: Managing Risk in the Networked Economy,” s+b, Spring 2003; Click here.
  2. Moisés Naím, “The Five Wars of Globalization,” Foreign Policy, January/February 2003
  3. David Rothkopf, “Business Versus Terror,” Foreign Policy, May/June 2002
  4. Jeffrey E. Garten, The Mind of the CEO (Perseus Books/Basic Books, 2001)
  5. Global Trends 2015: Click here.
  6. National Strategy for Homeland Security: Click here.
  7. 2001 Quadrennial Defense Review Report: Click here.
  8. Lehman Brothers Eurasia Group Stability Index: Click here.
 
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