swissVR Monitor: What do you see as the major geopolitical risks facing Swiss companies over the next 12 months?
Aldo Schellenberg: The COVID-19 pandemic and the war in Ukraine are intensifying ongoing risks and global supply chain dependence, the supply of energy (gas and electricity) and food, and government debt. The pandemic has also highlighted the fact that countries or nations throughout do not have friends, only interests – albeit shared interests – in the best-case scenario. In times of shortages, this prompts states to react instinctively with nationalist and protectionist responses that impact not only on the procurement situation for companies but also on exchange rates, inflation, and economic growth. And history teaches us that a shock to the supply side substantially increases the risk of stagflation. Russia’s aggression towards Ukraine has also transformed Europe’s existing security architecture. The policy of ’change through trade’ has failed, and the emerging new security architecture will involve increased confrontation and tension and be based on mistrust and sanctions. In geopolitical terms, we will see new blocs forming on the basis of economic, technological and military rivalries and protectionism – and that will significantly restrict Swiss businesses’ economic room for manoeuvre.
swissVR Monitor: How can the Board of Directors help to tackle these geopolitical risks?
Aldo Schellenberg: In La politique universelle (1852), journalist and politician Émile de Girardin rightly argued that governing means predicting and failure to predict is a step on the road to ruin. As a company’s strategic leadership body, the Board of Directors is responsible for actively tracking geopolitical trends, identifying the opportunities and risks these represent for the company and the sector, and drawing conclusions for how the company should respond. Alongside sectoral knowledge and specialist competencies, Boards therefore also need the skills to be able to analyse and react to geopolitical challenges.
swissVR Monitor: How is today’s world of VUCA transforming the role of the Board of Directors?
Aldo Schellenberg: The world of VUCA (volatility, uncertainty, complexity and ambiguity) is narrowing companies’ planning horizon and requires businesses to be agile. The response to VUCA is, in fact, also VUCA – standing this time for vision, understanding, clarity and agility. VUCA requires Boards to think and act more holistically and in a more networked way. Alongside their analysis of how the current situation has come about, Boards need to identify possible future trends. This requires them to think in terms of much broader scenarios than a traditional SWOT analysis, bringing together (geo)political, environmental, economic, social, statutory and technological developments. The aim is to recognise trends and potential disruption and the impact they may have on the company. Management therefore needs to present the Board with strategies for different scenarios and information on how the company can make use of the opportunities and mitigate the risks they represent. Scenario-based risk management is crucial to agile leadership and successfully tackling crises.
swissVR Monitor: Are Boards of Directors increasingly taking on a crisis management role?
Aldo Schellenberg: The Board of Directors is the company’s strategic leadership body. Its role is to set out a clear vision, develop a company-wide understanding of VUCA, create clarity and transparency in governance and the associated roles and expectations, and put in place the prerequisites for ongoing innovation and adaptation. This includes appropriate scenario-based risk management and effective crisis management. There is an underlying risk that during a crisis, the Board spends its time on urgent operational issues rather than keeping its focus on its strategic role. Actual crisis management – that is, leading the crisis team – is the job of senior management, which can, where necessary, task the Board with specific projects. This is likely to increase the demands made on Boards in terms of the time spent on their mandate and the issues they need to tackle while remaining focused on their core strategic role. Successful crisis management requires leadership and experience in systematic and holistic decision-making under time pressure and against a background of uncertainty. The Board’s responsibility is to develop management’s core skills in this area – and, where necessary, its own skills too.
Board member at skyguide and Swiss Innovation Forces
Aldo C. Schellenberg is married with four children and lives in Zurich. Thirty years ago, he founded schellenberg consulting and still owns the company, which supports medium-sized and large companies across a range of sectors in strategically important projects. His wide-ranging experience in the area of business administration, including as a Board member, has seen him regularly called as an expert witness in civil and criminal court cases. Between 2012 and 2020, Aldo C. Schellenberg held a number of senior leadership roles in Switzerland’s armed forces as Commander of the Air Force, Chief of Joint Operations Command and Deputy Chief of the Armed Forces. His current roles include serving as a member of the Board of the Swiss air navigation service provider skyguide and of Swiss Innovation Forces. He also advises companies on governance and crisis management.