French companies not fully prepared for geopolitical risks

12 November 2024 Consultancy.eu

French companies operating abroad face risks and market disruptions caused by geopolitical instability. A new study from DGA Group and global law firm Dentons shows that while most companies have safeguards in place, many remain underprepared for a major crisis.

The report, which surveyed 200 business leaders in France, found that 61% of companies have had to navigate disruptions caused by geopolitical events over the last two years. The vast majority (94%) noted that they experienced disruptions due to the ongoing war in Ukraine.

Supply chain disruptions are typically near the top of the list of worries when it comes to geopolitical instability. A total of 63% of companies reported that their supply chains have been disrupted at some point, with 64% noting that they had implemented measures to diversify their supply chains.

Despite the clear threat that geopolitical risk poses, the study shows that companies are not totally confident in their ability to deal with a crisis. While 88% of companies said they have a strategy for ensuring business continuity in the cases of a crisis, only 8% believed they would be prepared to act ‘very quickly’.

French companies not fully prepared for geopolitical risks

Source: DGA Group and Dentons

Likewise, only 9% said they would be prepared to act ‘very quickly’ to adapt their strategies to future risks. This appears to show a certain degree of doubt (or even a false sense of security) when it comes to companies’ ability to manage crises.

“Our research demonstrates that risk monitoring and broader strategic planning remain insufficient in many organizations, while the level of risk continues to grow,” said Erwann Le Page, partner and general director at DGA Group. “Companies must develop forward-looking strategies that anticipate future market disruptions, identify weak points, and establish crisis management protocols.”

Building resilience

There is an urgent need for businesses to boost their readiness in a global environment that is increasingly marked by volatility. That is especially true for French companies – and European companies more broadly – considering the instability that the Ukraine war has caused in Europe and the uncertainty over the future of security in Europe.

French companies not fully prepared for geopolitical risks

Source: DGA Group and Dentons

Disruptions over the past five years were fueled by the global pandemic and the war in Ukraine, while the coming years are likely to be defined by the rapidly expanding conflict in the Middle East. For example, supply chains in the Red Sea have been severely affected by attacks on vessels from rebel groups in Yemen.

Cybersecurity is another major risk that cannot be overlooked. A total of 82% of surveyed French companies have invested in cybersecurity, though far fewer have so far implemented measures specifically to target geopolitical risk.

“There are various forms of legal protection that companies can implement now to protect their business in case of a major market disruption. Most importantly, advanced preparation can help companies act fast, which is essential to preserving value in difficult times,” said Pierre Parvine, Europe co-head of industrials at Dentons.