This article identifies lessons we can learn from the impact of the conflict in Ukraine on businesses, as presented in the first part, to continue enhancing our understanding of the way businesses and the corporate world could usefully anticipate or foresee geopolitical and political risks and uncertainties.
From the way to identify which crises and geopolitical uncertainties can be – sometimes unexpectedly – of concern to a company (Lesson 1) to the best timing for starting the anticipation process (Lesson 2), the need to think outside the ideological box (Lesson 3) and multi-dimensionally (Lesson 4) and to understand “national interest” and its evolution (Lesson 5), the impacts of the war in Ukraine bring us a wealth of understanding and points out many necessary if not crucial improvements that may be endeavoured. These will thus be added to the points previously identified in “Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)”, after a general framework was defined in “Businesses and Geopolitics: Caught up in the Whirlwinds?” (1).
Our aim with this series is to offer tools, answers and solutions that should help businesses to properly address these very specific “risks” and uncertainties. These will also be integrated within the ways through which the Red (Team) Analysis Society serves the corporate sector, besides, more classically, governments, state apparatus and NGOs, be it through its open access articles (find out methodological and topical articles on the front page and through the menu), its membership only resources, its consulting or its training.
Lesson 1: How to know if this geopolitical crisis, uncertainty or risk, is important for my business?
Think dynamically at 1st, 2nd, 3rd… nth order.
Once geopolitical uncertainty is obvious enough to be detected, which firms should be concerned?
In the case of Ukraine, it is likely that those businesses which initially paid attention to the unfolding crisis (see Helene Lavoix, “Conflict in Ukraine – Setting the stage” The Red (Team) Analysis Society, 19 May 2014) were those doing business with Ukraine. Yet, as pointed out in the first part, “Impacts of the Conflict in Ukraine“, those who were also primarily impacted could have had absolutely no business relation with Ukraine, from companies exporting to Russia to airlines, the insurance or tourism industry, and agri-businesses worldwide not exporting to Russia at the time.
Thus, the obvious answer to “who is concerned by this issue, uncertainty or crisis” is most of the time not sufficient, if not misleading and dangerous. In our case, a company selling food products to far away Kamchatka could have been more severely impacted by the war in Ukraine than a large company with potential deals in Donbass.
The solution to this problem is relatively easy, once one knows how to properly make a strategic foresight and warning analysis, notably using a correct mapping of the issue, as is the focus of our related online course. Indeed, in anticipation, strategic foresight and warning and risk analysis, one must not only properly work out direct impacts, but also identify those consequences that are most likely to develop over time, including because of the interconnected nature of international relations. As a result, effects tend to propagate. Mapping a crisis, issue, risk or uncertainty, i.e. creating a conceptual graph for this problem, is not only the most convenient tool and methodology we can use, but also part of a branch of mathematics upon which we can lean.
Being able to identify and evaluate chains of impacts and interconnections is key here, and graphs are the best way to supplement systems thinking when this type of cognitive process has not been naturally developed. When analysts are used to use systems thinking, then graphs are perfect to channel and enhance the cognitive process.
Lesson 2: If there is uncertainty, starts anticipating as soon as possible.
The cost and sometimes irreversibility of what is lost, such as export markets, as seen, should be a huge incentive for the corporate sector to start anticipating as soon as change and tension, thus uncertainty, are detected. In the case of Ukraine, foresight could have beenstarted as soon as 21 November 2013, when the Euromaidan protests began in Kiev, should other weaker signals existing before had been missed (see timeline in “Conflict in Ukraine – Setting the stage“, ibid.).
If we compare the timeline and dynamics of the conflict (“Setting the stage,” Ibid.) with the dynamics of the sanctions as presented in the first part, we see that the worst and most irreversible impacts mainly started once economic sanctions were imposed, i.e. in July 2014. Thus, we may think that, actually, there was a window of opportunity to properly anticipate, notably through scenarios and their indicators, that lasted from end of November 2013 to end of July 2014, i.e. 8 months or so.
Things are, however, more challenging. If we think in terms of actionable foresight, thus in terms of having enough time to, first, make proper scenarios, then, second, design a response strategy and finally, third, implement the related actions, then what we see is that the quality of the time available actually changes over time. We can apply here what was identified by Joseph Nye regarding the escalation to war and as displayed on the figure below: we are faced with a shrinking funnel of choice (Joseph Nye, Understanding International Conflicts: an Introduction to Theory and History, 7th Edition, [HarperCollins: 1993], p. 81).
The further away from the obvious start of the crisis, the less time and opportunities to implement the easiest or strongest responses, with the smallest incurred cost. Indeed, as the geopolitical or political crisis progresses, escalation develops, which also shrinks the range of possible answers and the time available to implement them. For example, should companies possibly impacted had as response option to unite with peers and lobby against sanctions, their likelihood to succeed definitely decreased as misunderstanding and tension heightened between Russia and “the West”, to say nothing of the rapid escalation that led to the incorporation of Crimea within the Russian Federation. Similarly, considering the challenge to develop new contracts abroad, the likelihood to have these fully operational before some exporting firms became potentially cash-strapped, which could start impairing operations, was reduced with time, while the imperative to find alternative sources of finance inversely increased.
Thus the process of anticipation, strategic foresight and warning or risk management must be started as soon as possible, indeed as soon as a company – or more broadly an actor – has identified that this specific issue might impact its strategy and operations.
Nonetheless, anticipating later rather than never remains crucial. Out of this late anticipation, new options of answers and alternative policies and strategies may arise. Furthermore, the unsettled, uncertain or escalating situation will change and morph in something different, which could also further impact businesses. For example, the 2016 election of Donald Trump as President of the U.S., added to the highly likely coming change of French policy after the May 2017 Presidential elections, considering candidates’ declarations, let us expect that tensions with Russia are likely to be greatly lowered and relationships be normalised, at least as far as France and the U.S., two permanent members of the United Nations Security Council, thus holding veto power, are concerned (e.g. for France, Leonid Bershidsky, “Vladimir Putin Is Winning the French Election“, BloombergView, 21 Nov 2016;. Le Blog de Jean-Luc Mélenchon, “Le Monde félicite Poutine et soutient la Russie“, 30 Mars 2016).
Failure of other European states, and of the E.U. to move in a similar direction could further negatively impact European companies. As another example, should relationships normalise “across” the West, failure to foresee it could put a company at a disadvantage compared with competitors with a better actionable foresight.
Lesson 3: Think outside the ideological box
In “Lessons from and for the Brexit“, we already pointed out the risks entailed by the prominence of ideology or belief-based analysis. With the war in Ukraine, a similar danger was – and still is – at work, declined along different strands, from looking solely at a willingness to “spread democracy” to the shock relative to the incorporation of Crimea into Russia, for example, which led many to fail to wonder if sanctions against Russia could somehow also impact sanctioning countries.
In the case of Ukraine, another specific belief was probably also at work in allowing for the tragic downing of the MH17: a (winnowing away?) widespread belief that our era, notably in “liberal democracies”, cannot truly know war, related violence and brutality. In this imagined perception of the world, war and its corollary of deaths and destruction are increasingly rare, and, anyway, only for others, always far away, most of the time for “Third World”* countries. This belief is somehow exemplified by Francis Fukuyama “The End of History?” (The National Interest, Summer 1989 – pdf), although Fukuyama’s ideas and argument are much more complex. This very influential article also, most probably, contributed to reinforce the idea itself. With this ideology, war soon becomes “unthinkable”, and thus a dangerous complacency may settle. As a result, it becomes quasi impossible to think that war may also hit and kill people engaged in an activity fully related to “globalisation” and thus benefiting from the peaceful progress that is bound to follow from liberalism.
On the contrary, when anticipating, it is absolutely crucial to identify all ranges of “possibles” – and not “plausibles”, which depend on current beliefs and thus may be biased (for the original idea of the cone of plausibility, see Rutz, McEldowney and Taylor, in Charles Taylor, Alternative world scenarios for a new order of nations, US Army War College, 1993: chapter 1 & fn 7). Fighting against biases is just good anticipation, whatever the methodology chosen and whatever the recipient of the anticipation, from states and countries to non-profit organisations to businesses.
Lesson 4: Think multi-dimensionally
The tragic instance of the downing of the MH17 over the Donbass in Ukraine and its impact, as seen, also points out a crucial characteristics regarding the way we may be thinking uncertainties and thus anticipating: we tend to think two-dimensionally only. However, this cannot be allowed if all types of businesses and corporate sectors are to benefit from anticipation.
Geopolitical and political uncertainties, crises and risks are most of the time initially geographically defined. Despite talks about globalisation and global issues, for many reasons, foremost among them the fact that we are material and localised beings, at one stage or another one comes back to geographical location. As far as territory is concerned, it is fundamental to consider that territory is not a two-dimensional space on a map, but a three-dimensional space in reality (the fourth dimension, time, is actually included elsewhere, when the mapping of the issue is done).Thus, when a war takes place it reaches above the ground and below the ground, according most of the time to weapons and means of destructions available to opponents. If we also consider satellites, then war definitely reaches high above ground. As space-related technologies are crucial for so many of our current activities, it is crucial to think about related dangers and threats, as explained for example in Global Strategic Trends out to 2045 (Development, Concepts and Doctrine Centre (DCDC) Strategic Trends Programme, U.K. Ministry of Defence, June 2014).
Similarly, we are used to restrain our thinking to terrestrial maps, when all maritime boundaries are currently being redrawn (the process is expected to be completed by May 2019), which also changes the way we must think territorial depth, with notably deep-sea mining (see Helene Lavoix, “The Deep-Sea Resources Sigils Brief“, RTAS, June 2012, updated Nov 2016).
Thus, if we are to properly anticipate – and this is not only true for businesses but also for all actors – then we need to think beyond a two-dimensional land-bound geography and use a three-dimensional space.
Lesson 5: Understand and consider national interest… and its potential deviance
In the light notably of the impact of the sanctions on European businesses, it is crucial that the corporate sector understands that decisions will be taken, with variations according to countries and powerful actors, also according to national interest or to a potentially deprecated or deviant version of it. In other words, for the sake of larger interests – ideally national ones which are more important than smaller ones, but also should benefit the collectivity, the nation – smaller interests within and others’ interests without will be sacrificed, most of the time without hesitation. A deviant version of national interest, borrowing from Aristotle’s Political Theory (Stanford Encyclopedia of Philosophy, Jul 1, 1998; substantive revision Wed Jan 26, 2011), would be the interest of those in power, clothed in a pretence to act in the name of the public good. The characteristics that usually imbue the idea of national interest would be automatically also benefit the deviant version.
The probable strengthened influence of “realpolitik” or Realism as a dominant (or fighting) paradigm on the international scene (e.g. Evans and Newham, Dictionary of World Politics; Stanford Encyclopedia of Philosophy, “Political Realism in International Relations“, Jul 26, 2010; substantive revision Tue Apr 2, 2013) – assuming it was ever weakened whatever guise it had taken – with the Brexit and the 2016 election of Donald Trump as U.S. President is likely to even enhance the importance of considering the idea and practice of national interest, whatever its version.
As a result, businesses – and citizens for that matter – may be sacrificed without much qualms to larger interests. This may be even more tragic in the case of a deviant national interest that businesses and citizens alike, using older norms and understandings such as the real national interest, would expect to be protected or, to the least, considered.
Incorporating coldly these evolutions and changes is necessary should companies wish to survive and thrive. For example, firms which operations involve flights over Mali and more generally a large part of the Sahelo-Saharan region would need to develop their own security analysis of the region to make sure that their flights will not be downed.
The idea of national interest could also be usefully applied to any company deciding not to be caught anymore in the political and geopolitical whirlwinds: any anticipation for businesses should start with outlining this specific company’s very interests, besides, of course, understanding well its activity and concerns.
The case of Ukraine has shown that not only companies may be severely impacted by political and geopolitical uncertainties that initially appeared not to concern them, but also has helped us identifying other lessons that need to be integrated to strategic foresight and warning, anticipation and risk management for political and geopolitical uncertainties, be they within a firm for the largest or/and without, should the best strategic foresight and the best warning be delivered in a timely way to concerned CEOs.
*On the concept of “Third World”, see, for example, “Seeing the world differently“, The Economist, 10 June 2010; Nico Smit, “The Continued Relevance of the ‘Third World’ Concept”, E-International Relations Students, 26 March 2013; Hans-Henrik Holm, “The End of the Third World?“, Journal of Peace Research, Vol. 27, No. 1 (Feb., 1990), pp. 1-7.
About the author: Dr Helene Lavoix, PhD Lond (International Relations), is the Director of The Red (Team) Analysis Society. She is specialised in strategic foresight and warning for national and international security issues.
Featured image: Donetsk. Lenin Square. Evening-requiem for the dead children of Donbass, 17 March 2015 by Andrew Butko, CC BY-SA 3.0 via Wikimedia Commons.