Geopolitics Changed It... The Winning Strategy for Corporate Management

Samsung Electronics, Hyundai Motor, and Other Large Corporations Establish and Strengthen Risk Management Organizations
Responding to ESG Amid Supply Chain Crisis... FKI Also Forms Economic Security Task Force

[Asia Economy Reporters Choi Dae-yeol and Jung Hyun-jin] "The Ukraine war is becoming a Black Swan risk." Recently, the UK Financial Times (FT) analyzed that since Russia's invasion of Ukraine on February 24, companies have been exposed to all-around risks due to various economic sanctions imposed.

According to Professor Jeffrey Sonnenfeld of Yale University, about 1,000 companies have so far withdrawn, downsized, or reduced local investments in the Russian market. Professor Sonnenfeld evaluated, "Historically, such a large-scale, rapid, and voluntary business withdrawal is unprecedented in scale and impact."

As the Ukraine war has extended beyond 100 days, geopolitical crisis management has emerged as the top priority for global corporate management. Major companies are consecutively establishing or strengthening related response organizations. Domestic companies' movements are also accelerating.

According to the industry on the 7th, Samsung Electronics recently established a Business Risk Management (BRO) organization for external crisis management response. Hyundai Motor Company newly organized an Integrated Risk Management Task Force (CFT) directly under President Chung Jae-hoon in April. The Federation of Korean Industries (FKI) also formed an Economic Security Task Force (TF) in May to prepare countermeasures at the business community level regarding economic security issues. Japanese companies such as Hitachi, a leading manufacturer, and IHI, a large heavy industry company, have also consecutively established internal organizations related to economic security.

The geopolitical risk index announced by BlackRock, the largest asset management company in the US, in April recorded 1.27, the highest level since the related index was first published in 2017. BlackRock analyzed, "The index surged due to conflicts between Russia and NATO," and "There is a high possibility of prolonged confrontation between the West and Europe politically, economically, and technologically."

Geopolitical risks pose new crisis management challenges not only to corporate supply chains but also in the increasingly emphasized ESG (Environmental, Social, and Governance) aspects. According to a survey conducted by US PR firm Edelman targeting 14,000 consumers across 14 countries worldwide, 59% of respondents said geopolitics should be the top priority for companies. Additionally, 95% of respondents answered that political and economic retaliatory measures should be taken if a country invades another without just cause.

This content was produced with the assistance of AI translation services.