New Zealand businesses navigate geopolitical risks amid global instability

International crises such as that in the Middle East, are affecting trade, sparking regional conflicts, and driving regulatory changes. Photo / AFP

As global instability grows, New Zealand boardrooms are increasingly focused on assessing and mitigating geopolitical risks.

Now in its third year, the Russia-Ukraine war, alongside the ongoing Israel-Hamas conflict and rising tensions in the South China Sea, has made geopolitical challenges an unavoidable point of discussion.

These crises are affecting trade, sparking regional conflicts, and driving regulatory changes, with 72% of New Zealand’s top executives in the Mood of the Boardroom survey confirming that their businesses regularly assess vulnerabilities to these risks at the board level.

A further 27% of respondents say they do not have this on their risk matrix, and 1% remain unsure.

The growing complexity of global challenges has led New Zealand companies to adopt a more rigorous approach to risk assessment.

For some, like investment fund Morrison, the conversation has become a constant fixture in its strategy sessions. CEO Paul Newfield explains: “We spend part of every board meeting discussing geopolitical risks and we get great external perspectives to challenge our thinking”.

Air New Zealand Chair Dame Therese Walsh echoes this approach, noting that “as a global airline, the business is impacted by international regulations and global trends, and these are always contemplated”.

Similarly, Beca Group chair David Carter says this used to be an annual review.

“However this has been increased in response to the rising geopolitical uncertainty.”

This heightened awareness reflects the global nature of supply chains, with one logistics CEO pointing out that “offshore supply chain disruptions and delays impact our operational performance”.

Respondents say that the global supply chain crisis, exacerbated by geopolitical tensions, has placed pressure on businesses to diversify their sourcing strategies and assess vulnerabilities in real time.

Deloitte chair Thomas Pippos says the discussion in the boardroom is done “more in the sense that we discuss the extent of geopolitical risks canvassed globally that get materially less airtime in New Zealand than overseas,” suggesting that New Zealand’s relative isolation can lead to a lack of attention to global issues.

While most respondents report regularly assessing geopolitical risks, there remains a significant portion who do not, but recognise the need for more proactive risk management, particularly in light of rising global uncertainty.

“Not currently — but it should be, and we have discussed that it must go on the agenda,” notes an agribusiness director.

Others feel geopolitical risks are not a pressing concern for their businesses, with the CEO of an investment firm stating: “This is not really a risk for us”.

However, the overwhelming majority agree that even businesses that feel insulated today should be assessing the long-term effects of global instability.