The Chartered Institute of Internal Auditors and Airmic, a U.K. association of risk management providers and insurers, are advising businesses to prepare for further geopolitical disruptions on the eve of the one-year anniversary of Russia's invasion of Ukraine.
With geopolitical tensions on the rise, both organizations believe businesses may not be prepared for the next big crisis, and issued a
The report said that boards, internal audit and risk management should recognize geopolitical issues as a strategic risk to the business, intensifying other risks to supply chains, legal and compliance, reputation, financial liquidity and cybersecurity. Scenario planning and horizon scanning are essential in preparing for geopolitical risks.
The new era of geopolitical uncertainty calls for organizations to be flexible in responding to crises and remain in a permanent state of readiness, and the report says that all stakeholders need to be more agile in responding to events occurring with regular frequency. Sharing intelligence and making it relevant to the organization are essential.
"Boards should be looking to both their internal audit and risk management functions to get assurance that their scenario planning processes for geopolitical events are robust — in the new era of geopolitical uncertainty collaboration is key," said Richard Chambers, senior internal audit advisor of AuditBoard (and former president and CEO of the global IIA), in a statement.
With internal audit having a direct line to the audit committee, and risk management having a direct line to the risk committee, both internal audit and risk professionals have vital roles to play to ensure greater resilience from geopolitical events.
"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," said Anne Kiem, chief executive of the CIIA, in a statement. "Internal auditors, working in partnership with risk management, have a vital role to play in supporting organizations' preparedness for major geopolitical incidents."
Internal auditors and risk professionals should speak up and say the unthinkable when it comes to geopolitical risk and potential scenarios. They should do this even if they take the risk of being unpopular with the board. The bigger risk is of senior management or the board turning around and asking, "Why didn't anyone see this coming?"
"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," stated Airmic CEO Julia Graham. "Building resilience is imperative. Businesses need to be prepared to deal with significant disruption caused by political incidents."
