Geopolitical events and international trade developments are
reshaping the global economy, and companies are having to grapple with complex
ripple effects. To help corporate directors and senior executives navigate these
complex challenges, NACD featured two mainstage events focused on geopolitical
risk and international trade at its 2019 Global Board Leaders’ Summit.
The Sunday slate of programming featured an inspiring speech
from former NATO commander and admiral James Stavridis, in addition to a panel discussion
with economist Harry Broadman, former Obama administration deputy chief of staff
Mona Sutphen, and former ambassador to Mexico Antonio Garza on the
ramifications of escalating trade tensions on American business. Collectively,
these two sessions surfaced the following insights to attendees:
Cybersecurity remains top of mind. As Stavridis noted in an interview earlier this summer, cyber threats remain a critical challenge to security for businesses and the nation as a whole. Particularly at risk is the element of our national infrastructure that functions as it has for more than a century—namely, our electrical grid. The grid’s simplicity—it remains much the same as it was at the time of its installation—makes it an easy target. In Stavridis’ view, more investments are needed to properly protect our grid against malicious actors of all stripes. (In the governmental sphere, he specifically mentioned Russia and how this nation is habitually mounting cyberattacks.) Given its structural weaknesses and potential for wide-spread impact should it be compromised, business and government leaders should remain mindful of this challenge and be ready to partner to secure this system that underpins many aspects of day-to-day life.
Today’s era of uncertainty will have long-lasting effects. It remains unclear how long today’s era of global, political, and economic uncertainty will last. According to the panel on economics and trade, what does seem likely is that the shifts that have taken place in recent years will have a lasting impact on the domestic and global trade environment. Sutphen remarked, “What’s happened goes to the confidence and trust of relationships within international markets. The lost opportunity costs are tremendous, and the longer this [trade environment] persists, the harder it will be to bounce back from the lost trust and confidence.”
Ambiguity creates room for new opportunities. The architecture of how we trade with other countries is being fundamentally altered, resulting in greater levels of uncertainty across markets. With ambiguity comes risk, as well as potential opportunities. In this environment, the ability of companies—and boards—to constantly adapt will be a critical quality to possess. As Sutphen remarked, “In the old days, companies could pay a premium for certainty in their supply chains; today, enterprises will have to pay a premium for flexibility in those supply chains.” Broadman added that directors should view global developments not only “in terms of mitigating risks, but growing their companies while mitigating risks.”
Emerging markets will play a critical role. Stavridis previously spoke of the outsized role Africa and India will play in the coming decades. Broadman largely supported this view, pointing out that as western countries increasingly turn inward, “the African continent has just embarked on a groundbreaking policy of creating a continental free trade area.” In the next decade, this economy—worth $2.5 trillion and with 60 percent of the population less than 25 years old—is well positioned to emerge as the engine of global growth.
Democracy and capitalism are still wedded. Broadman, Sutphen, and Garza stressed that the best US strategy involves promoting both democracy and capitalism abroad. For Sutphen, there is a direct correlation between the free flow of capital and democratic ideas. As she sees it, the end of the Cold War marked an ideological victory for the United States. Garza reminds himself of these ideals with a note on his desk which reads “free markets, free peoples, America’s role in the world.” Garza and Sutphen in many ways were echoing a point made earlier in the day by Stavridis, who urged the United States to promote “values at scale, because that’s what [its] opponents are doing. We have to compete in this way, and if we do this successfully, we’ll enhance our global security.”
Prepare for a continuous learning journey. These complex issues will require board members who—while they may not be experts in every aspect of oversight required of them—are enthusiastic learners. Stavridis urged board members to own their respective educations by staying informed through reading publications that are nonpartisan and broad in scope. Garza echoed this recommendation, stating that “though they don’t have to be experts, directors should engage on these issues so they can more effectively incorporate them in discussions around strategy.”
Corporate leaders must avoid complacency. Garza called on directors and business leaders to proactively challenge criticisms of global trade and advocate for its varied benefits. “We’ve gotten complacent about the rules-based trading system and the security architecture of NATO,” Garza said. “There was a point at the start [of the current presidential administration] where we didn’t engage as assertively as we should have. [Now] boards need to step up.” Sutphen also noted that there is a need to make micro-arguments for trade to everyday citizens, commenting that trade discussions should evolve past the macroeconomic level and get deeper into “worker retraining, employee mobility, and making a better granular case about why the average American should care, rather than approaching this as a one-off issue.”
Despite the current state of geopolitical and economic
uncertainty, Stavridis remains optimistic. Quoting Napoleon Bonaparte, he observed,
“A leader is a dealer in hope.”