Business leaders must take action and undertake scenario planning to be ready for future geopolitical incidents, warns a new report from the Chartered Institute of Internal Auditors and Airmic.

With Friday 24 February marking the one-year anniversary of the start of the war in Ukraine, the two industry bodies are urging businesses to prioritise action to prepare for further geopolitical disruption. With geopolitical tensions rising around the globe, they warn that businesses may not be prepared for the next big crisis.

They have joined forces to issue a new report – Navigating geopolitical risk – published in partnership with AuditBoard. The report is aimed at encouraging boards, internal audit, and risk management to work closer together in tackling the risks associated with geopolitical events.
With internal audit having a direct line to the audit committee, and risk management having a direct line to the risk committee, the organisations say that both internal audit and risk professionals have vital roles to play to ensure greater resilience from geopolitical events.

Among its key recommendations, the report says that boards, internal audit, and risk management must recognise geopolitical risk as a strategic risk to the business, adding that it does not sit in a silo but instead exacerbates and intensifies a myriad of other business-critical risks such as supply chains, legal and compliance, reputation, financial liquidity, and cyber security.

It also warns that scenario planning and horizon scanning are key to preparing for geopolitical risk, adding that organisations must resist the temptation to be events-led and retain agility for when crises strike. This includes planning that is constantly challenged, stress-tested, and with regularly updated baseline assumptions about the likelihood and impact of the risks they could face.

Anne Kiem, chief executive of the Chartered IIA, said: “With geopolitical risk still growing in severity, business leaders must learn lessons from the conflict in Ukraine, by making sure they are properly prepared for the next big crisis that could be coming down the track. Internal auditors, working in partnership with risk management, have a vital role to play in supporting organisations preparedness for major geopolitical incidents.”

Julia Graham, CEO of Airmic, added: “Geopolitical risk is becoming far higher in profile on the risk radar of most businesses and is a board agenda item – one which demands a collaborative response from risk and internal audit professionals. Building resilience is imperative. Businesses need to be prepared to deal with significant disruption caused by political incidents.”

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