Assessing geopolitical risks – and opportunities

Geopolitical dynamics today are punctuated by evolving trade and investment flows, ongoing conflict and major power competition for international influence, resources and emerging industry expansion.

It is often hard to keep up and maintain a clear line of sight on the impact and implications across many countries and political systems.

"Ultimately, geopolitics is about the human side. What makes countries confident, what makes them anxious, how are they likely to work with or against each other and how are those interactions going to create opportunities and risks for ANZ and its client-base?” – Cameron Mitchell, Head of Geopolitical Risk, ANZ

It is even harder to assess the impact to your own position. The corporate sector is increasingly buffeted by events within these complex systems and their many policy implications.

ANZ has expanded in this area under the Head of Geopolitical Risk Cameron Mitchell, who joined the bank in March 2021 to set up and manage its geopolitical risk function.

With a background in strategic assessment for the Federal Government in Canberra, in 2014 Mitchell moved to HSBC to lead a dedicated geopolitical risk team for the Asia Pacific.

The necessity of dedicated experts in geopolitical risk has only grown over the last 20 years with an increasingly interconnected and changing geopolitical environment.

ANZ is the most outwardly focused of the Australian banks and the international business within the Institutional division operates in 29 different markets across the globe.

The expectation from both customers of the bank and its staff and board to understand what’s happening politically across the region has never been greater.

”From the boardroom to the crisis centre, more and more corporates are seeking to proactively manage the impact of geopolitical developments – by onboarding political risk consultancies and ideally also developing in-house expertise,” Mitchell says. 

Political instability

Historically such geopolitical risk roles were most often linked to the extractive sector and their need for advice on supply chains and security of resources in regions of political instability.

The spread to other sectors began in earnest following the September 11^th, 2001 attack, other attacks by foreign actors and heightened international tension with the Iraq War uncertainty and volatility.

Since then, there’s been a steady stream of conflicts and political instability threatening to disrupt international trade and financial markets. Think Russia’s invasion of Ukraine, instability in the Middle East, military brinkmanship in Asia and policy surprises in a record year for elections around the globe.

“The Russian invasion of Ukraine had many second and third-order impacts on the energy and food sectors. Then in 2023, we started hearing a lot more about US-China relations. The US Government really started refining its “small yard, high fence approach” to its engagement with China,” Mitchell says.

“The US is looking at a targeted approach to protecting certain parts of its economy – that it considers to be of critical national security importance.”

“Also last year countries started bedding down industrial policies and economic security initiatives. We saw that from the US, EU, Japan and South Korea. Countries started thinking about economic resilience, shoring up supply chains and the critical minerals sector. And then this year elections and developments in the Middle East have dominated.”

Through the geopolitical team, ANZ has two experts to deliver new insights as factors change. Mitchell and manager Simon Papagiorcopulo give priority to understanding key political and security policy changes both locally and internationally and analysis of the implications for the bank and its clients.

“I am ostensibly a risk person. But you can imagine when you're doing work of this nature, the clients that ANZ works with find this information particularly useful as well. So, a big chunk of my role is client facing,” Mitchell says.

On his radar are changes in legalisation and governments through elections. Mitchell presents these strategic considerations through briefings with clients and bank staff.

Looming elections

It is easy to appreciate the necessity, value and contribution of this role by looking at recent events such as disruption and supply change issues during COVID-19 and other conflicts.

Much of Mitchell’s time is currently dedicated to the US election and preparations of policy profiles for both Presidential nominees – Kamala Harris and Donald Trump. This includes likely policy directions of the White House, including appointment of senior officials, commitments, aspirations and key areas such as trade and the environment.

What are the implications for Australia, the financial services industry, the economy and consumers? Will policy in the country change as a result of international re-positioning? What large-scale shifts are emerging?

“A big structural shift is the policy implications if Trump is elected. He will likely bring big change in policies across a number of sectors. The alternative is if Kamala Harris becomes President. I think there will be a couple of subtle changes or shifts there, on foreign policy for example.”

“Support for Ukraine is likely to be another area where the candidates differ significantly. That support will definitely be more conditional if Trump is elected.”

For Mitchell, something new and surprising always presents itself in the world of geopolitics.

”Ultimately, geopolitics is about the human side. What makes countries confident, what makes them anxious, how are they likely to work with or against each other and how are those interactions going to create opportunities and risks for ANZ and its client-base,” Mitchell says. “I find that challenging, but ultimately - when the analysis does bring about positive change - immensely rewarding.”

Ensuring specific geopolitical expertise is available to inform the bank’s position and strategy is a huge step forward.

One thing is certain, in Australia’s region understanding the impact of geopolitics will only become more pressing.

Thomas Warren is a bluenotes Contributor.