‘For me, geopolitical issues are becoming more important, because how can you understand the economy if you don’t understand geopolitics? People think economists just deal with spreadsheets and charts. That’s a narrow-minded caricature.” – Nouriel Roubini, Turkish-American economist.
We all understand that Geopolitical risks can cause severe disruptions to businesses. The Russia-Ukraine war is a classic case explaining the unpredictability of the geopolitical crises and why they are difficult to predict and why there is no answer to when they will end. For instance, a Tsunami, Hurricane, or earthquake will not continue for weeks or months but a geopolitical crisis like war can be continuous as seen in the Ukraine crisis as the war is continuing for the last 9 months with no possible end in sight in the near future.
Geopolitical risks need elaborate contingency plans and the risks can be high like evacuating employees out of a war zone is no easy task and securing sites from an armed conflict requires detailed planning.
Chinese President Xi Jinping said “We will continue to strive for peaceful reunification with the greatest sincerity and the utmost effort, but, we will never promise to renounce the use of force and we reserve the option of taking all measures necessary. This is directed solely at interference by outside forces and a few separatists seeking Taiwan independence.”
The above statement by the Chinese President cannot be seen in purely political terms but has wide-ranging implications for businesses operating in Taiwan. This statement has been interpreted in a way that can be summed by an executive at a leading Japanese chip manufacturer: “We will bolster our emergency response”.
Nikkei, one of the world’s largest financial newspapers surveyed executives of 50 multinationals conducting business in Taiwan between October 19 and October 28 to understand their responses. Most of these multinationals are headquartered in Japan or United States. Read about the news here.
SURVEY RESPONSES
1. 4 companies already have plans to evacuate their expatriate employees in Taiwan and how to continue their operations in a crisis.
2. 19 companies were already making such plans.
3. 21 companies were thinking of making such plans. Read about the news here.
CONTINGENCY TRAVEL PLANS
“A man who does not plan long ahead will find trouble at his door.” Confucius, Chinese philosopher
Whenever a major crisis like a geopolitical conflict occurs, the first casualties are generally flights that are grounded to protect civilians. So, before flights shut down, reservations are already in place for the evacuations.
Reserving plane tickets is an option that is in place which involves flight tickets reserved in advance for potential evacuations. A reservation list has been created to ensure that expatriate employees can return Japan at any time as per the survey.
Local Taiwanese employees are also being asked in the case of an invasion by China if they would like to stay or leave.
However, as the number of local employees will generally exceed expatriate employees it will be a mounting challenge to evacuate local employees in case of crisis, and as the risk factor with employing local workers increases their jobs could be in jeopardy posing a threat to the business operations in the country.
Also, one important factor to consider here is the air travel situation which has reduced in capacity due to the COVID-19 crisis. So, evacuations may not always go according to the plan as a result companies are reducing the number of expat workers in Taiwan to mitigate the risk. Read about the news here.
BUSINESS CONTINUITY STRATEGIES
“The time to repair the roof is when the sun is shining.”- President John. F. Kennedy
1. Delegation of Authority
In case of a crisis, if for instance, the Japanese executives leave Taiwan, then how to delegate authority to the local Taiwanese remains a challenge.
2. Securing communications
In case communications are cut between Taiwan and Japan, satellite phones serve as a good option and one executive confirmed that his company has already introduced satellite phones. Read about the news here.
3. Alternate manufacturing sites
It is important that organizations operating in Taiwan look for alternate sites outside the country for the operations of businesses so that business continuity is secured.
4. Back up trained workers
It is essential to have trained personnel in alternate sites outside the country who can recover the company’s operations quickly.
5. Data transfers
It is important to ensure that data is backed up or is transferred from Taiwan to any other safe nation so as to secure all the required information assets.
CONCLUSION
So, are geopolitical risks difficult to manage so that business continuity is secured? Well maybe or maybe not, as it entirely depends on our planning for the contingency in advance. If we have proper plans in place for every possible scenario in a war-like situation, there are more chances that the business would survive.It is important for the organizations to take cognizance of the host countries where their organizations are based in order to factor the geopolitical risks. The risk factor will not be the same across the world where war zone areas will have a higher risk factor compared to areas which are relatively peaceful.
Gorisco has a wide range of experts who have various solutions to help organizations mitigate their risks and solve their problems.
At Gorisco, our motto is 'Embedding Resilience' and we are committed to making the organizations and their workforce resilient. Reach out to us if you have any queries, clarifications, or need any support on your initiatives.
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