Managing 21st-Century Political Risk

Political risk was once relatively easy to define-more often than not, it involved dictators seizing foreign assets. Today it comes from a wide array of actors: citizens making videos on cell phones, city officials issuing ordinances, terrorists with truck bombs, cybercriminals, and more. Supply chains are longer-and more vulnerable-and the geopolitical landscape is more crowded and uncertain. But just because you don't know exactly where political risk will come from, that doesn't mean you can't prepare for it, say Rice, the former U.S. secretary of state, and Zegart, the codirector for the Center for International Security and Cooperation at Stanford. Effective risk management is still fairly straightforward. Companies that excel at it are strong in four core competencies: understanding, analyzing, and mitigating risk, and responding to crises. In this article, Rice and Zegart outline what each competency entails, providing questions that every organization can ask to identify gaps, along with case studies that illustrate how companies have successfully addressed real-world political threats.