Why Firms Need Geopolitical Risk Simulations, Not Just Reports
/You walk into your office at 7:45 in the morning. It’s a typical Tuesday, and you’re getting ready to call the strategy, policy, legal, and public relations teams together to deal with an ongoing situation in a country that’s blocking access to your service. Unbeknownst to you, President Donald Trump has just tweeted about your company. Your phone starts vibrating. You check the notifications and realize what’s happening. All hell is about to break loose- supporters are praising you, while critics are urging a boycott. You know that a response of some sort is necessary, but this is only your third week on the job. You sit down at your desk and pull out the employee handbook. Unfortunately, there is no section called “When a World Leader Tweets About You.” Now what?
This is an extremely exciting time to be involved in global affairs and international business. But one’s excitement about potential opportunities is another’s paralyzing uncertainty about the potential pitfalls. Political risk, defined as any change in a company’s business and security operating environment, abounds. This is true both in traditionally risky frontier markets and increasingly in developed countries, especially following events like the election of Donald Trump, and the continuing fallout from Brexit. Geopolitical risk is not just a concern for investors, nor does it only manifest in vacillations in the financial markets, as I’ve written about previously. For startups especially, who often fail to realize how political risk can deal a deathblow to operations, it is not always obvious how an engineering team’s action could affect or be affected by geopolitical risk. Most engineers have never taken a course on political risk, or witnessed how a tweak in code or app capability can hamstring another team’s work or be seen as a threat by a government. But rather than exploring the ways that political risk can affect their operations in depth, most companies continue to rely on the vague, quickly outdated, and largely useless reports that traditional risk consultancies provide.
Has a report ever truly changed your mind after you had made it up? Unlikely. There are several reasons for this, some of which I’ve discussed in earlier posts. First, many reports are commissioned after a decision has already been made, to serve as confirmation or to tick a checkbox on a compliance form, and as a result, only the most basic questions are asked. The desire is to be proven right, not ask tough questions that could jeopardize an investment or rollout. Second, reports are usually written by fresh out of grad school analysts who only have a cursory understanding of how the business they are informing actually functions. Consequently they are unlikely to appreciate the complexities of the decision being made or the need to consider and account for the likely second and third order effects. Third, the report is likely to be based largely on only what the analyst can Google from his or her desk under a tight deadline. Not surprisingly, this means the analyst’s — and most importantly — the client’s biases go unchallenged. Finally, the reports are rarely read; executive summaries are skimmed, but rarely with an open mind. It’s the business equivalent of TL;DR. Is it any surprise then that many decisions appear to have been inadequately contemplated?
After seeing this cycle repeat itself for years and across industries, including mining, logistics, higher education, and tech, I’ve come to the conclusion that although the written word is powerful, it is neither adequate for helping clients understand their exposure to political risk, nor useful for empowering them to make decisions, address their vulnerabilities, or seize opportunities, on its own. Once views are deeply entrenched, and confirmation bias and group think take hold, the written word has limited effectiveness in challenging opinions, changing minds, or improving actions. To change a mind requires changing perspective, a task most effectively accomplished by exposing a person to an experience that tests their views and forces them to make decisions under less than ideal conditions. Immersive experiences allow a subject to see what happens when theory, or bias, meets practice. That meeting is often messy, but it’s also frequently the chaos from which the best ideas can emerge. As I like to say, expectations rarely survive first contact with an experience. The level of intricacy that a robust simulation conveys is far higher than would ever be possible in a written report.
You wouldn’t want to be taken to a trauma surgeon who has only read medical texts. And you wouldn’t send a soldier into a critical battle after he has only read a field manual. We require that these professionals practice their craft against the unpredictable — through residencies and war games, respectively — because many emergency surgeries and firefights do not go exactly, or even remotely, as planned. Immersive learning is not just for high intensity professions. Studies have repeatedly shown that people learn just about anything better by doing- practicing procedures, experiencing simulated ethical dilemmas, and acting out decisions. Think about how you learned in school- the teachers did not just hand out a pamphlet on evacuating during a fire or active shooter situation; we all practiced these drills regularly, with different circumstances. It’s the same with businesses and political risk. You can’t just give a handbook to employees and trust that they’ll automatically know how to respond to a stressful situation or make a difficult decision without having ever practiced it.
This is all precisely why I’ve turned my focus towards helping my clients via customized, interactive, immersive simulations. These simulations help the client to diagnose their vulnerabilities (information stove-piping, lack of clear chains of command, unusual circumstances, etc.), anticipate and analyze major decisions, identify shortcomings in processes, and train their staff members in more effective protocols. In these simulations, participants play their own roles, and communicate via their normal channels (whether chat programs, email, texts, or in-person conversations), meaning there are no complicated instructions to learn. These exercises take place at their headquarters, in familiar surroundings, meaning clients get the truest possible view of their own operations under stress. Injects, or pieces of information that drive the plot of the simulation, are customized to look like the real information that employees handle everyday, whether tweets or news articles for the public relations team, or technical readouts for the cyber security teams, designed by subject matter experts who are intimately familiar with the realities such teams face. The situations that clients confront are constructed based on rigorous analysis of crises that the firm has faced in the past, decisions that they’re actually struggling to make, or situations that they repeatedly encounter and want to train their staffs to address more effectively.
I’ve seen participants go from being upset at having to attend such a simulation to actively engaging in the process, and suggesting new practices to help address problems or anticipate challenges, all in the span of 3 hours. I’ve never seen that happen as a result of a report. And that’s why clients are increasingly requesting this service- they see the change in their employees, and they see the tremendous benefits of taking a day to engage in a simulation vs. the expense and lack of utility associated with vague and quickly outdated reports.
While no simulation can predict the future, well-crafted ones can simulate the chaos of a crisis or the pressure of a major decision, allowing you to troubleshoot and develop more effective processes. If you were the executive in the story above, my simulation would’ve addressed the potential for a vocal political figure to bring sudden social media attention to your company. Your team would have been forced to weigh multiple response strategies that address the immediate crisis, while still dealing with more systemic issues, like the government that is blocking your users. Instead of just having pondered it yourself and giving in to your biases, you’d have the opportunity to harness the thoughts and ideas of members of teams across your organization, to understand the situation from the multiple perspectives, and to anticipate the various consequences of the options. You would have had to challenge your biases, and experience how unconfirmed assumptions can exacerbate a crisis. You would have learned how to find or analyze information, verify its authenticity, share it with people who need to be aware, prioritize actions and decisions, and work with other executives to form a cohesive and complementary response. By facing the simulated experience in its full dimension and complexity, you’d be ready to bypass the disorientation of an actual chaotic situation and instead find yourself empowered to make the most of an opportunity.
Milena Rodban is a geopolitical risk consultant and simulation designer based in DC. She can be reached via Twitter (@MilenaRodban) or email (milena@milenarodban.com).