Planet Governance

April 2024

Chris Clark conducts interviews with leading corporate directors and subject matter experts for Stuart Levine & Associates. The Planet Governance? interview series features the views of corporate directors, chief executives, and governance experts on timely issues from risk oversight to stakeholder activism to cyber resiliency.

This CEO believes that smarter, more highly successful organizations actively monitor geopolitical pressure points, apply those learnings, and create scenarios...

Over the past nine years, Steve Roycroft has served as CEO and member of the board of directors at RANE, a global risk intelligence company providing risk professionals with critical insights and analysis to better anticipate, monitor, and respond to emerging threats.

In addition to these roles, Steve has served as a board member of Smarsh, FRT-Financial Recovery Technologies, and Aktana. He is also a member of the Risk and Security Council for the Nasdaq Center for Board Excellence.

Chris: RANE has recently come out with its 2024 geopolitical risk forecast. Are there a few highlights that you can share?

Steve: The main headline is it's the year of the global election. A general election will cover half of the world's population. Seven out of the 10 most populous nations in the world will have general elections. From a geopolitical standpoint, that has broad implications, which parties get elected, and how do they tilt one way or the other on key regulations or around trade partnerships? Those elections will have an impact over the next half-decade.

We work with large corporations, government agencies, and academic institutions, and when we pulse our universe on risk, geopolitics and cybersecurity are always in the top five.

Geopolitics plays a key role and understanding those pressure points and adapting to those pressure points is essential to business success. I think it's critical for most medium and large multinational corporations, but I think we're starting to see it being pushed down deeper into the small business marketplace as well.

Chris: That said, let’s touch on all of the difficulties and the complexities of China as many large U.S. companies are leaving.

Steve: U.S./China relations have been center stage for some time, and they will remain center stage for decades. It's one of those situations which was highlighted in a recent 60 Minutes episode. The two largest economies in the world are both friend and foe and have two very different orientations, from a democratic perspective here in the U.S. to a controlled-state perspective in China that are both competing for influence, commerce, and trade across the globe. This element of competition and co-existence ebbs and flows on the "heat" index.

Chris: Please explain to me what is meant by applied geopolitics.

Steve: ?When we think about applied geopolitics, it's integrating it into how the business operates, and then being thoughtful about how things could evolve in terms of scenarios and forecasts, and then creating the requisite business continuity plans or resilience plans associated with those scenarios. There are methodologies where you can look for mile markers along the way. What are the indicators? What are the implications? How intentionally will your senior management team and board monitor geopolitical risk issues?

Chris: Just to be clear, it's a framework for monitoring. You're not talking about dashboards. You're talking about a much more holistic, ongoing framework.

Steve: Everyone has a dashboard in this day and age. Of course, the outputs of that framework and methodology could be visible inside of a dashboard. To me, it's much more about the methodology.

How you track these issues, how you then unpack them in terms of various scenarios that could unfold. When you're doing that, you get out of reactive mode, and you become far more strategic. Take the concept we were talking about earlier about elections. They go one way or the other. If you feel confident it's going to go one way, there's a set of implications that will happen with that party being in power and where that goes. There's a flip side to that if it doesn't go that way. Being prepared for that is a smarter way to think about integrating geopolitical coverage and how you run your business. That's the application side of it. It's a framework. It's a methodology. It's being integrated into how the business runs.

Chris: Are corporate directors besieged with too many dashboards?

Steve: Yes, to a degree. I think companies have learned the hard way thanks to COVID that breaking down risk silos is paramount.

Our company looks at these issues through an integrated lens. Geopolitical issues are at the center, but then we get into physical safety and security issues, the whole digital space and cybersecurity, and then the legal and compliance issues that wrap around everything.

Corporate boards have an arduous task these days when you think about all of the issues they need to address and get enough information to be effective. The company has to figure out how much outside information to share or how little so that it can provide value. It is a difficult balancing act.

Chris: Stuart Levine & Associates is a data-driven firm, but our secret sauce is the interpretation of confidential data coupled with decades of board experience. What makes your intelligence, valuable and mission-critical to your clients?

Steve: It's our unique lens and continuum of coverage. We leverage technology to source millions of bits of information daily. We've created a risk framework as a service where we ingest that information and tag it according to our proprietary taxonomy. What does that do? It allows you to filter out a lot of noise, and to tag information very specifically to a topic or a category, but also create a relational map around your core risk categories.

If I'm interested in cyber-crime patterns in a particular industry or market, then I can drill down very specifically to those issues and explore any related items. As risk professionals, it's not always what's coming at you front and center. It's what's happening on the periphery. What are the other things I need to be thinking about so I can be asking the right questions, and pressure test our policies and procedures or operations in a particular market?

Quite simply, our continuum of coverage ranges from open-source intelligence to interpretational analysis, to connecting the dots with forecasts on how we think that particular issue or area of the world will evolve in the coming days.

Chris: In other words, you help directors with your timely interpretations to ask the right questions at the right time.

Steve: Yes. Again, as a director and as a CEO, I try to make sure our board is as effective as they can be, sharing relevant information so that they can ask smart questions. Both from a fiduciary standpoint and a governance perspective, it’s a balancing act, and that's why having an effective risk framework on how you track these issues, how you break down operational silos, and then present information in a digestible way is where you can support better decision-making.

Chris: Are there one or two marketplace trends that you would like to highlight?

Steve: This is not original, but it's dominating the headlines. It's the pace at which AI is evolving. Every company I engage with is either testing it, deploying it into their products, or rolling it out into their operations to create efficiencies. The testing and deployment of AI and the pace at which it is evolving are going to create fantastic opportunities. On the flip side, the level of new risks will also grow in parallel.?

You also have regulators that are running at pace to try to implement guardrails to support this evolution.? What does that create? It's going to create this fragmentation of regulations, for example, the EU has already come up with some directives and regulations around AI. This is a good starting point,?but each country and region is going to adapt at a different pace. So there will be?this global patchwork of laws, regulations, and guidelines with AI that I think certainly will create challenges for companies in the days ahead.?It's been tested for decades on the technology side, but now it's hitting this inflection curve, and the adoption rate is breathtaking --- it's going to create both opportunities and risk.?

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Chris: From a compliance standpoint, a patchwork regulatory system with different approaches from different countries in and of itself increases risk. Will this be like the current patchwork of privacy requirements?

Steve: Yes. There are significant challenges in managing the disparity in data privacy regulations and data security issues across markets, and AI will amplify those challenges. The evolution of this technology is moving at such pace, and beyond managing the situation on the ground today there are things we haven't even thought about yet. One thing for certain is the role of the compliance officer has gotten materially harder due to the range of issues they are now responsible for covering.? This is in addition to the traditional risk issues that still vex all-size companies, I'll call them the basket of financial crime issues, whether those are sanctions, money laundering, fraud, or corruption. There are a lot of things pulling on these compliance professionals where they must be informed and educated sufficiently to ask the right penetrating questions. Again, not so dissimilar to what we're thinking about at the board level regarding governance responsibility, i.e., educated enough to ask smart questions.

Chris: Steve, what is your final word?

Steve: The smarter, more highly successful organizations actively monitor geopolitical pressure points, apply those learnings, create scenarios, and understand which way the proverbial wind's going to blow, and then take intentional actions based upon those decisions.

I think now more than ever geopolitics is a major facet affecting how a company thrives, and getting a proper handle on it can be leveraged to mitigate risk, and quite frankly, to maximize opportunities.

Chris: Steve, thank you for sharing today.

Chris Clark joined Stuart Levine & Associates as a senior consultant after a distinguished career at the National Association of Corporate Directors ("NACD"). He is known for his prominent role in the creation of NACD's "The Power of Difference", "The Leading Minds of Compensation" and "The Leading Minds of Governance" conference series, "The Directorship 100", and NACD Private Company Directorship.

Chris' expertise ranges across a variety of disciplines including corporate governance with board assessments and strategic communication audits as cornerstones, conference management, and digital content creation.

www.stuartlevine.com

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Stuart R. Levine Greg Radner Steve Roycroft Michael Marquardt Pamela Packard Fay Feeney Carol Meyers Sheila A. Stamps David Rosenblum, NACD.DC Jeff Hoffman, NACD.DC Peggy Foran John J. Burke, Jr. Deirdre Dastous Littlewood Brett Stephens Greg Lau Shelley Leibowitz Nathanael Tarwasokono Michael W. Robinson Sheila Hooda James "Jim" Grogan