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Robert McKellar
Part 1 of this series on political risk management and the Canadian forest products sector speaks to the problem with assuming political risk only applies to multinationals with operations in volatile and dangerous places. If we are aware of political risk, we can still use a tacit approach where it works, but we will know when and how political risk is a significant factor and will have the option of ramping up political risk management capabilities accordingly. With that preamble, two broad political dynamics affecting the Canadian forest products sector are discussed—the ‘China-West rivalry’ and ‘climate change confusion’—in preparation for the question—is it time for Canadian forest products companies to develop an explicit sense of political risk and how to manage it? Part 2 of this series continues with the political dynamics of ‘Canada-US trade friction’ and ‘emerging market challenges’ and concludes with what a political risk management capability could mean in practice.
…If the answer is Yes, what then? A political risk management capability generally includes: senior management and board buy-in; a strong concept of political risk in the company’s context; a corporate intelligence process that identifies relevant trends and dynamics and derived potential implications (or risks); straightforward but practical guidelines for how managers could apply political risk intelligence; and a seat of coordination and institutional learnings. These elements could manifest in a number of different organisational forms… but there are four things that probably would not work in most cases: treating political risk management as something different from what managers already do; creating a political risk department and expecting it to somehow lead to effective political risk management; managing political risk only within enterprise risk management functions and processes; and creating a few policy documents and then ticking a box beside “political risk managed”.