100 days of Trump: how risk managers are adapting to a state of “perma-crisis”

The first 100 days of Donald Trump’s presidency has ushered in a new era of geopolitics and UK risk professionals are adapting to managing risk in a new world order, according to Airmic.

Speaking on the Political Risk podcast with producer David Benyon, Airmic’s head of research, Hoe-Yeong Loke, and chief markets officer, Alex Frost, said that the new Trump administration has up-ended the global norms of the past 30 years, and Airmic members must ensure they have the flexibility and preparedness to adapt.

Master your situational awareness

While global trade, military relationships, social systems and national alliances have undergone almost unimaginable changes during the early phase of the second Trump administration, it is the unpredictability of the policy changes that is particularly challenging for businesses.

The wave of new trade tariffs globally offers the most clear-cut example. According to Hoe-Yeong, keeping abreast of constant changes is one of the biggest headaches for risk professionals.

“The big risk [for our members] is supply chain risk…The overwhelming concern is the uncertainty of frequent tariff changes, one day after the next. So it’s about keeping up with what is going on. The key thing they are looking out for is data, data, data.”

The starting point for a risk manager is always situational awareness, agreed Alex. This means “having a robust system in place to inform you about what the changes are or what they’re likely to be,” he advised.

Continuing with the example of trade tariffs, Alex said that risk professionals should not be expected to keep up with the intricacies of every change across each country. Instead, they need to ensure they have access to “reliable partners to provide you with that information. The people that let you know the red flags when they’re coming.”

Preparation and agility are key

Being flexible and adaptable will also become vital in this new era of uncertainty, noted Alex. “It’s about being proactive and prepared and ultimately being able to change things when you need to.”

Conducting scenario analysis is a useful tool to promote an agile response, he continued. When Canada announced it would be putting retaliatory tariffs on US imports, the government delayed their implementation by two weeks to give companies the time to adjust their supply chains.

Two weeks is an extremely tight window to re-route suppliers, said Alex, but those organisations that had already run through a scenario in which they had to re-design their supply chains at speed were at an advantage.

Being agile does not mean improvising

Given the unpredictability of the current geopolitical landscape and the scale of change, some political commentators believe businesses are operating in a state of “perma-crisis”, noted the host, David Benyon.

Hoe-Yeong agreed, observing that risk managers that have made careful and rehearsed crisis plans will be well-positioned: “Being agile does not mean improvising [your response to crisis] on the fly. There must be preparedness behind that.”

Having a small and agile crisis team in place with clearly assigned roles, collaborating with internal audit and stress testing crisis plans should all be done before an incident arises, he added.

Furthermore, risk professionals should use the current environment to ensure their crisis plans are being continually updated, said Alex. “It shouldn’t be something that you dust off once a year and review but it should be an organic document that is worked on continually throughout the year.”

Supply chains and regulation: how do you operate globally?

As part of his research role at Airmic, Hoe-Yeong analyses weekly member surveys to keep a finger on the pulse of the UK risk management community. He said that the most immediate challenge facing Airmic members since Trump came into power is supply chain risk.

The baseline mitigation approach being adopted by Airmic members is the diversification of suppliers, he said. “But also more and more of our risk managers are talking about supply segmentation, where you essentially divide your supply chain network into groups – because not all suppliers carry the same risk exposures.

“It’s not just to diversify but to delve deeper into how you spread your risk across your suppliers.”

Legal and regulatory changes are also challenging risk managers, especially those in global corporations. For example, the Trump administration has significantly rolled back its policies designed to promote diversity, equity and inclusion (DE&I) in the workplace, leaving it out of kilter with its European counterparts.

Some Airmic members and partners with operations in the US report being sent directives from the US government asking them to disclose their DE&I practices, noting that they may be in violation of equality legislation in the US for following practices like affirmative action.

“If you are a multinational that is based in both Europe and the US, and in the EU it’s encouraged that you follow DE&I practices and in the US it’s now being discouraged, how do you operate globally?” said Alex.

“You need to have a more compartmentalised approach to regulatory alignment. These are huge problems for the risk management community and their legal departments.”

The next 100 days

Will the next 100 days be as turbulent as the previous? Only time will tell, but in the meantime, risk professionals should assume that the norms of the past can no longer be relied upon.

“I think many of our Western liberal democracies, both in Europe and North America, would have thought of the US as a friendly country,” said Alex.

“It just goes to show how quickly things can change in the current geopolitical environment that what was once a friendly regulatory aligned trading partner, suddenly may not be.”

Click here to listen to the full and wide-ranging conversation between Hoe-Yeong and Alex, moderated by David Benyon.