Resilience in the Face of Geopolitical Threats

6 steps treasury and finance teams can take in response to the Ukraine crisis to build a more effective business continuity plan.

For the past two years, it has felt like we’ve been living in a state of constant crisis. From the global pandemic and massive supply-chain disruptions to rising inflation and cost of living, to large-scale cyberattacks that have stopped businesses in their tracks, numerous unexpected events have threatened operations in organizations large and small, in every part of the world.

The importance of operational resilience was already clear at the start of this year. Then Russia created a new geopolitical crisis by invading Ukraine. That war has presented multifaceted challenges for global businesses. Depending on the organization, the conflict may threaten employees’ safety, create problems in the supply chain, or depress demand for the company’s products and services.

Since February, corporate treasury teams have been assessing the immediate and potential future effects that the Ukraine invasion may have on their organization. They should also have been taking swift action to mitigate those expected effects. Corporate adaptability and the flexibility to quickly make informed decisions are more vital today than ever before.

Now, six months after Russia’s initial invasion of Ukraine, many corporate treasury teams are evaluating their response to the crisis and adopting best practices for building business resiliency so that they will be better prepared for whatever crisis comes next. Here are six steps treasury professionals can take to prepare for future geopolitical problems:

1. Plan for action. Every business needs a comprehensive crisis and business continuity plan. Treasury, finance, and risk management professionals should develop the plan in collaboration with other key stakeholders. Having a business continuity plan in place means the organization can quickly activate it in the face of an unexpected crisis, to ensure the business can continue operations.

There are, necessarily, many moving parts in a comprehensive business continuity plan. It should designate subgroups to be activated and subtasks to be performed in the event of a crisis. Such delegation enables corporate risk managers to remain organized and efficient in orchestrating the companywide response. Subgroups can take responsibility for specific tasks within the business’s overall continuity response—tasks such as coordinating activation of alternative vendors or engaging with the C-suite on critical decisions and approvals.

An effective business continuity plan must incorporate an understanding of vendor and supply-chain dependencies, and map business processes in detail, in order to project the potential impacts of a prospective disruptive event. As you develop or update your organization’s business continuity plan, focus on your most crucial processes, those that support your business’s key services and products. If your company does not have a complete vendor/supply-chain map to critical products and services, use existing data on your products and services, and engage from that point.

When you are finished, your business continuity plan should provide a roadmap for high-level organizational response to a variety of possible crises. One scenario that treasury groups should specifically plan for is an economic downturn, when cash flows and markets are not acting favorably.

2. Prepare to be agile in enacting the plan. The plan is not the end goal. Developing the plan is a good exercise that helps build muscle-memory responses throughout the organization, which can be very helpful in times of crisis. However, your organization must be able to look at the plan, understand how a specific situation deviates from that plan, and quickly act.

This type of agility requires decision-makers to have data on how operations run and to understand all moving parts that contribute to the usual functioning of the business. Mapping this data in an organized way helps enable action without delay anytime the business faces a significant disruption. Understanding how your organization works gives you the knowledge to put things back together if disaster strikes.

Process mapping should start within your organization and extend to all the internal and external dependencies among the vendors, other participants in the supply chain, software applications, people, and physical sites that support your daily business functions. Simply knowing who oversees what functions and tasks is not enough. One business process might be managed by different teams in different regions or countries, and it may use different vendors for the same product or service across different geographies.

The goal of process mapping must be to clearly document operations at every level, delineating all the upstream and downstream dependencies. Also, document which vendors you rely on for which operations, to understand the impact on your business in times of crisis and to inform well-thought-out decisions.

3. Prioritize flexibility and resilience. Operational resilience gives organizations the tools to understand operational data points and locations. Once decision-makers understand the company’s data, they can effectively map and analyze it for multiple situations, preparing for a wide range of disruptions that the organization may possibly face. Whether it’s hit with a geopolitical crisis, natural disaster, or supply-chain shortage, a resilient organization is able to digest dynamic data and take swift action.

Proactive planning provides you with an opportunity to prepare multiple pre-discussed and pre-approved options for response to specific events. By prioritizing flexibility and resilience in the planning process, you can ensure your organization does not have a single point of failure.

4. Gather data that enables you to pivot and adapt. Over the past two years, we have experienced wide-ranging crises that have affected almost every organization in some way. Business disruptions are here to stay. It’s no longer a question of whether another crisis will occur; it is a matter of when.

Never has it been more important for a business to be able to pivot and adapt to any disruption. That’s why monitoring the global threat landscape is critical. Seeing a crisis coming gives you the time and ability to respond before danger is imminent and the situation requires an immediate, knee-jerk reaction. Treasury, finance, and risk management teams need to have real-time information about what’s going on outside your organization so that they can proactively stay ahead of potential disruptions.

5. When crisis strikes, immediately assess the impact. In the event of a crisis—whether foreseen or not—the first step in formulating your business’s response is to assess the impact of the expected threat or disruption. This means fully understanding which processes, customers, vendors, and/or partners might be affected.

Your business continuity plan should help streamline this evaluation, but keep in mind that every crisis is different and you’re unlikely to have every possible impact mapped in advance. Consider how offices in or near the crisis area are being affected. Employee safety and security should be your top priority. At the same time, consider whether government interventions—such as sanctions, financial limitations, or other restrictions on operations—may hinder your organization’s ability to function as usual.

Even if your company does not have direct ties to the geographic areas affected by a particular crisis, no organization exists in a vacuum. Identify events’ impact on your business-critical vendors and determine how that might impact their business. The effect on vendors and the supply chain may not be instantly apparent, so treasury, finance, and/or risk management professionals should proactively reach out to third-party providers and inquire about their operations and resilience plans in light of an impending crisis.

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6. Take a people-first approach. When preparing for—or responding to—any disruption, organizations should put people first. With the proper data, preparedness, and planning, companies can seamlessly adapt to new operational models and logistics, with a focus on what truly matters: the lives and safety of the affected people.

By showing genuine care for employees and their families, as well as customers and suppliers who may be affected by a crisis, organizations can boost morale and build their brand externally. But taking a ‘we are all in this together’ approach to recovery requires more than just social media posts and marketing copy. The management team and staff should demonstrate genuine care; if they do, their actions will help increase stakeholders’ loyalty beyond the period of disruption.

Organizations should also be brave and stand up for what they believe is morally right. Do not lag, out of fear, while your competitors take a particular stance. Diversity, equity, and inclusion (DEI) actions are not about politics; they are about caring for human life and putting people first.

 

Looking Ahead

The geopolitical crisis in Ukraine is evolving by the minute. The situation a business faces today may change tomorrow. As in any crisis, organizations grappling with their response to the war in Ukraine must prioritize agility so that they can flex and adapt as new developments occur.

If you have not started your resiliency journey yet, this is the perfect time to start it so that you are ready for whatever crisis we face in the future. With the appropriate preemptive and proactive measures in place, your organization can prioritize what really matters—human life.

Bogdana Sardak is senior director for risk and resiliency for Fusion Risk Management. Her professional experience extends across many areas of risk management, including resilience, third-party risk management, operational risk management, and crisis management. 

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