ASSESSING & MANAGING RISK
“Political risk — the probability that a political action could significantly impact a company’s business — is affecting more businesses in more ways than ever before”, according to former U.S. secretary of state Condoleezza Rice and Stanford University professor Dr. Amy B. Zegart, who co-authored POLITICAL RISK: HOW BUSINESSES AND ORGANIZATIONS CAN ANTICIPATE GLOBAL INSECURITY, a 336-page book released May 2018 in hardcover and a year later in paperback by Hachette Book Group’s Twelve imprint. Page numbers cited refer to the hardcover edition.
This book remains timely because of the political climate in our nation, and offers a framework for collecting data on risks organizations and people face, analyzing that data and then acting in prudent ways. “The goal of political risk analysis is not to predict the future. Nobody can do that. The goal is to create better decisions for your organization by developing insight about key drivers and possibilities” (pg. 169). “Good political risk management mostly comes down to focus” (pg. 75).
There are some leaders who have obtained their positions through a careful vetting of candidates for the job, by stress testing in activities designed to measure their cognitive abilities, independence or interdependence on others, communication skills, and other relevant criteria. They may have tried two or three times to get to that place, but the vicissitudes of life and prevailing circumstances kept hobbling them, sidelining them and muting their voices.
Others with charisma and serial entrepreneurial experience have amassed a coalition of people willing to follow them, to overlook certain — or many — glaring deficiencies, and by domination or manipulation of trusted communication channels, they ignited a chain reaction that propelled them over the finish line in first place. Character is magnified, not just made, following a promotion with more responsibility, visibility and power. Whatever you were lacking when you arrived, will still be lacking unless you have people around you to help identify areas improvements can be made, and you and the team compensate for weaknesses and major on strengths, with as much effort and humility as you can.
“Tripwires are systems that identify what information to look for in advance. Protocols make clear what steps should be taken by whom when the tripwire gets crossed…(pg. 207). In the most general sense, tripwires may include laws, policy statements, common-sense expressions of best practices, and combinations of physical and online technologies that set the protocols into motion. When somebody sets off one of these, or crosses that line in the proverbial sand, depending on the severity of the occasion, consequences more resolute than a slap on the hand must occur if a lesson is to be learned and loss to the property or organization is to be avoided.
Forward deployment means working closely with each business unit, understanding its priorities, pain points, and communicating political risk perspectives to executive audiences so the political risk is baked in, not bolted onto decision-making as an after-thought (pg. 183). A component baked in is blended and fused with the other components, whereas one bolted on is auxiliary, considered an outsider and less central to the functioning of the system.
There are numerous news clipping services and intelligence briefings compiled from analysts and consultants in various disciplines that may be subscribed to. “Companies on the front lines of managing global political risk have developed in-house threat assessment units staffed with former intelligence and law enforcement professionals” (pg. 205). Think of them as private mini-CIAs that gather and interpret massive amounts of rapidly changing information for their executives to absorb and act on. The authors mentioned something that is public knowledge, that FedEx Corporation has a former NSA Deputy Director on its Board of Directors, who is on three committees, including Information Technology Oversight.
The authors of this book are uniquely qualified to speak to the issue of how political actions affect business. As a former U.S. National Security Adviser and U.S. Secretary of State who impacted thousands, if not millions of people, as she analyzed and acted on classified intelligence, Condoleezza Rice also has thirty years of academic association with Stanford University. She now serves as the Denning Professor in Global Business and the Economy and teaches political science courses at Stanford, as well as being the Thomas and Barbara Stephenson Senior Fellow on Public Policy at the Hoover Institution.
Dr. Zegart was a management consultant at McKinsey and Company before serving as the co-director of the Center for International Security and Cooperation, the Davies Family Senior Fellow at the Hoover Institution, and a senior fellow at the Freeman Spogli Institute for International Studies at Stanford University.
The authors say that risk management is a cost center that sometimes is hard to justify to executives and shareholders. “Cyber protection measures, legal teams, risk officers — these functions produce no revenues” (pg. 84), so this begs the question: was Benjamin Franklin right about a penny saved being the same as a penny earned?
“People who don’t pay attention to political risk who have any vulnerability to it, ignore it at their peril,” warns Frederick W. Smith, Chairman and CEO of FedEx Corporation (pg. 12). “Secretary Rice and Dr. Zegart have melded their professional experiences of managing political risk at the highest levels with other case studies into a uniquely useful and profound book,” Smith said in praise of POLITICAL RISK (quote on back cover).
Providing assurances using probability theory is the work and plaything of insurance actuaries, betting bookies in Las Vegas, and meteorologists, who will crunch the numbers and throw the dotted bones to discern the likelihood of everything, from what horse or dog to bet on, who are profitable choices for marketing health, property and life insurance to, to whether freezing rain or clouds with meatballs are in the weather forecast this coming weekend. It is part art, part science, with arguably some alchemy mixed in.
Leadership of any sized organization, whether public- or private-sector, whether a government or a family, must manage their risk exposure. Operational, public relations, legal, human resources, and every other stakeholder group must be proactive in identifying new and changing threats and opportunities. This matrix with three questions related to each of the four steps an organization must take in regard to political risk is found on page 107 [hardcover edition].
After failure, [business] postmortems reveal all sorts of information that could have been shared beforehand but wasn’t…A 2009 survey by [Darcy Steeg Morris and] the Cornell University Survey Research Institute found that 53 percent of respondents admitted they never spoke up about an idea or problem. When asked why, many said they thought it would be a waste of time or could hurt their careers” (pg. 236, 237).
Having an anonymous reporting system for whistleblowers to use, can provide organizations with valuable information located in blind spots or held in fiefdoms’ information siloes, while protecting the individual sounding the alarm on some questionable or heinous activity. Some people want things to get better but do not want their names attached to new initiatives or bold ideas that feel countercultural, so to avoid political baggage, they lobby from the shadows. A lot of of good can happen if you’re not too particular about who gets the credit, it has been said.
Many companies are part of industries with associated non-profit bodies that gather feedback from all levels of companies, their vendors and customers, and produce insightful reports. More than one employee has run afoul of bosses and reputational management types in their company when given the task of responding to one of these third-party surveys. They were given a time and place to do it, known to management, and video and snag-it images from the employees’ sessions on company computers were retained. Anything that looked like a rant against existing conditions or was a middling rather than strong positive candid evaluation, would be frowned on by higher-ups and decisions would be made to selectively enforce certain rules and regulations governing the employees’ conduct.
H.R. may be directed to set speed traps, if you will, and be ready to document those ill-favored people all the way onto the street with signed severance, non-compete and non-disclosure forms, thank you very much! Sometimes sexual temptations and items of value were made available in an entrapment fashion, and if wrong choices were made, leverage against employees was gained, where people could be “owned” or disowned with quick quiet exits obtained. While still within the companies, those employees kept overhearing conversations designed to provoke a fight-or-flight response, or “information” and water cooler gossip that would help discredit whoever repeated it.
Remaining average, like an unlabeled commodity, without distinctive characteristics or passion for one’s work, seems to me more likely to get somebody passed over for promotion, or facing a cut in hours or a work layoff. “If a man is called to be a street sweeper,” Dr. Martin Luther King Jr. told us, “he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.’”
“Rewarding courageous acts fosters a premortem culture — encouraging people in the organization to volunteer information about what could go wrong before it does go wrong” (pg. 236, 237). Hindsight is 20/20, they say. To think critically about opportunities and problems in front of us, where we add value and energy rather than drain it out of the room, will distinguish us from practitioners of mediocrity and bring us to the attention of those in charge (Proverbs 22:29).
Chances are excellent the Company knows everything about what its employees, customers and vendors are doing on its equipment and networks, especially if they brush up against one of the tripwires. At that point, the relevant protocols will be started and somebody will get schooled about using best practices on work-related computing devices, or receive discipline that could involve loss of responsibilities, dismissal or legal action.
FedEx’s entrepreneurial Mr. Smith is generally considered to have an above-average appetite for risk in making business decisions, enabling some groundbreaking, even gravity-defying innovations along the way. Just as he was ahead of many companies in investing in IT infrastructure and the means to protect the Company assets it connects, he invested in the school-to-work pipeline in Memphis, partnering with the University of Memphis to create the FedEx Institute of Technology. Students — some with advanced degrees — work on many emerging technologies across scientific and technical disciplines, and FedEx’s sponsorship gives it the right of first refusal in licensing deals for patents and trademarks developed.
Americans should be proud of the robust rights we now enjoy. Some have arguably been under siege within the past five years; non-profits and governmental agencies alike have documented many abuses within our country, especially in regard to freedom of the press and of speech and the freedom of assembly. Reform in police practices remains needed, as seen by the numerous unarmed people, especially those of color, injured or killed with little or no provocation.
Authoritarian leaders in numerous other countries rule with gloved fists, and there are little to no separation of powers in their governments to keep their ambitions in check. A citizen may create a satirical cartoon or make a joke about an unpopular leader in power, and the cabal in power will then reflexively come after that individual with extreme prejudice. The dictator’s appetite for “risk” of this kind is sadly lacking.
Too many people in such countries find themselves suddenly unemployed and ostracized, before a judge, facing fines, imprisonment, or may just be “disappeared” — extraordinarily rendered to the backside of the desert or tundra — with no justification or information given to grieving loved ones. If they don’t succumb, they may be returned to polite society months of years later in poor physical and mental shape as examples of why those who make the rules are not to be opposed. I am thankful most of our leaders have a thick skin and can take well-deserved criticisms without resorting to lawsuits, intimidation or worse extralegal means of retribution.
The authors of POLITICAL RISK have written a definitive work on how organizations and people alike can anticipate and manage during global insecurity. Understanding how to prioritize, grade sources of information, and execute your plan, will make a crucial difference in your future.
Quotations noted as such, and tables of information are Copyright © 2018 by Condoleezza Rice and Amy Zegart.
All other commentary is Copyright © 2018, 2021 Darin Allen Newberry and shared under the terms of https://creativecommons.org/licenses/by-nd/4.0/
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NOTE: This article does not necessarily reflect opinions of the FedEx Corporation or my fellow employees; I wrote it in a personal capacity on my own time as a business writing sample.
BONUS: Check out my latest story, Decertifying Boondoggles “R” Us.
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