Operational Risk Leaders’ Network: The geopolitical risk playbook

The latest Risk.net Operational Risk Leaders’ Network meeting was held in January in London against a backdrop of geopolitical events that demonstrate recent turbulence is unlikely to dissipate any time soon. As geopolitics shifts from being an external ‘macro’ concern to a direct driver of op risk, senior op risk leaders discussed their different approaches to understanding and managing geopolitical risk, along with evolving scenario planning activities, and third-party and concentration risk strategies. Participants emphasised the importance of preparedness and resilience over granular multi-scenario prediction.

 

Key takeaways 

• Geopolitics is now a direct driver of op risk rather than a macro concern, yet institutions are in the early stages of evolution when it comes to their geopolitical op risk capabilities. 
• Organisations are largely disseminating geopolitical intelligence from central functions, ranging from high-frequency communications to strategic briefings for risk committees.
• Embedding advisory capability directly within the risk function can help to translate geopolitical intelligence into actionable risk insights. 
• Op risk leaders value preparation and resilience over scenario proliferation – focusing on response playbooks and enabling prioritisation and rapid decision-making, rather than predicting specific geopolitical triggers. 
• To counter third-party and concentration risks, institutions are working closely with suppliers to understand their geopolitical resilience and deep supply chain exposures.
• Stressed exit, recovery and pivot plans are essential, as speed of response increasingly defines effective geopolitical risk management.

 

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