HOW GLOBAL UPHEAVAL INFLUENCES BOARD DECISION-MAKING: What is the effect of Cold War II on corporate governance?

• Author: Montelongo, Michael
• Position: BIG IDEAS FOR CORPORATE GOVERNANCE

What should boards and companies do or not do when confronting the impact of geopolitical crises? It may be helpful to consider the broader context giving rise to these issues, namely why we're in the situation, the lessons we're learning about geopolitical risk in real time and the key insights that may be helpful in preparing for future geopolitical crises. These questions are timely because they address very important, urgent and serious matters that deserve thoughtful and prudent consideration.

HISTORY DID NOT END AFTER THE FIRST COLD WAR

After winning the Cold War, the West embraced the hopeful but mistaken notion that we could dismiss traditional forms of great-power competition and balance-of-power diplomacy. But hope is not a strategy; that misguided consensus was based on two faulty assumptions:

* America's victory in the Cold War was absolute and America's economic, military and diplomatic power ensured our indisputable supremacy for decades.

* The international "rules-based" world order we were building would be popular abroad and uncontroversial at home.

That new world order also ushered in an era of globalization complete with increasing economic and trade dependencies. The result created a tailwind for many of today's top executives while serious geopolitical issues were relegated to the stuff of history books.

Today, with simultaneous geopolitical Crises in Europe, the Middle East and East Asia, we are at a new and critical inflection point in geopolitics and the political economy. We face the most hostile international outlook since the dimmest days of the first Cold War.

Still, there is good news: Russia has made NATO matter again, reaffirming the transatlantic military alliance's modern-day relevance, value and solidarity.

But actions by authoritarian regimes are transforming the existing order, reshuffling global alliances, redrawing the geopolitical landscape with unclear economic and political implications, and rewiring global power flows that threaten to erect new barriers. Some say we are on the cusp of Cold War II, if not a hot one.

And even as we focus on deterring China and imposing costs on Russia, we cannot ignore threats from other states, such as Iran and North Korea.

THE BLURRING LINE BETWEEN THE PRIVATE AND PUBLIC SECTORS

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