swissVR Monitor: You serve on the Board of Directors of companies across different sectors. How do you see geopolitical risks affecting different sectors?
Barbara Lambert: Geopolitical risks are affecting all sectors, but with differing degrees of impact and severity. Supply chain bottlenecks and higher costs for materials have a different impact on construction companies and on businesses in the services sector. Implementation of a very complex sanctions regime, though, is a much greater challenge for the financial services sector than for B2C companies. Geopolitical risks may also have a positive influence in some cases (higher rates of interest, greater volatility and stock market transactions) but be negative in others (higher refinancing costs).
swissVR Monitor: How wide-ranging does a Board’s analysis of geopolitical risks need to be?
Barbara Lambert: Boards of Directors need to tackle the full range of possible impacts, not just creating an understanding of the possible direct impact on their own company but also appreciating second order impacts – the indirect and potentially long-term consequences, such as risks to SMEs and suppliers, creditworthiness, and taxation. The risks stem not only from financial impacts –lower revenues and operating margins, exchange rate issues, damage to goodwill and higher costs – but also from operational risks. However, not all sectors face the same severity of risk from, say, rapidly growing cyber risks, rising inflation, energy shortages and reputational risk.
swissVR Monitor: Is it possible to view geopolitical risks in isolation?
Barbara Lambert: No. Alongside geopolitical risks, we are grappling with the ongoing effects of COVID-19, skills shortages, and the potential for greater social unrest caused by food shortages. This is a toxic cocktail of major insecurities, and it is difficult to assess its scale and evolution over time. Will the recession last a few months or a few years? This goes beyond normal emergency planning: companies need to draw up two or three scenarios and plan short-term measures that they can implement rapidly. Boards need to anticipate, so that they are prepared for the worst while also maintaining their focus on strategic planning and implementation. Another important point is regular and transparent communication with customers and staff during these exceptional times to identify potential opportunities, maintain trust and shore up confidence.
swissVR Monitor: What are the sectoral differences in the potential opportunities represented by geopolitical developments?
Barbara Lambert: Geopolitical developments mostly reflect global influences in our highly networked world, so they also represent opportunities across sectors that differ in terms of a sector’s maturity, its existing international experience and, of course, its scope for investment and financing. I’m a realistic optimist and I firmly believe that any crisis also offers an opportunity to make companies more operationally robust and to accelerate difficult decisions while also promoting innovation and creativity. The recent pandemic also accelerated companies’ moves to digitalisation.
swissVR Monitor: What specific opportunities do you see?
Barbara Lambert: The current geopolitical crisis is a unique opportunity for companies to review their business model and strategic direction, in particular their market presence (withdrawal from specific markets and entry to or focus on new markets), their supplier network, alternative positioning of their procurement and stock planning, increased efficiency through optimisation of operational processes, product and service review, contract reviews, out-shoring, near-shoring and off-shoring, scope for M&A, and joint ventures, to mention just a few areas.
swissVR Monitor: Which instruments and measures do you recommend Boards use to help them identify and assess geopolitical developments?
Barbara Lambert: It is still rare for a Board of Directors to have expert knowledge of geopolitical issues. Boards therefore need to bring in external advisers and specialists, including specialised international consultancy companies and international business schools, including as part of Board members’ continuing professional development (for example, annual strategy workshops held jointly with management). The World Economic Forum’s Global Risk Report, publications from major consulting and audit firms, and specific reports from intelligent service providers and analysts also form the basis for open discussion of the risks and opportunities represented by geopolitical developments. Regular exchange with professional and sectoral bodies, international organisations, governments, official agencies and peers can also be of benefit. The speed, unpredictability and far-reaching consequences of geopolitical developments are not going to decrease in the coming years, so Boards will need to take both tactical and strategically far-reaching decisions. Today’s Boards need to be more agile. Taking account of geopolitical risks will become the ’new normal’ and will become a standard item on the agenda for Board meetings.
swissVR Monitor: How important is cooperation between the Board of Directors and the Chief Risk Officer in this context?
Barbara Lambert: The Board has a major monitoring role to play but also needs to provide support. Its job is to ensure that both geopolitical risks and opportunities are now included in the risk management framework (identification, assessment, probability and impact quantification, and the appropriateness of information systems) and in regular reporting. Scenarios and hypotheses need to be critically challenged if there is to be a robust basis for decision-making. The Board and/or Chairs of the Audit Committee and Risk Committee should engage in regular exchanges with the Chief Risk Officer – at least quarterly, and more frequently in times of crisis – with a view to sharing insights into best practice from other sectors or from round tables. The speed and unpredictability of geopolitical trends demand greater adaptability from companies, so the Board should be setting the tone from the top, paving the way for a culture of change management and risk-taking.
swissVR Monitor: Do Boards need a member with demonstrable experience and/or skills in risk management?
Barbara Lambert: Monitoring of risk management has actually been an explicit part of the role of the Board for years. The extent to which individual Boards require proven experience and skills in risk management will vary according to the company’s size and complexity and the sector in which it operates, but it is, of course, an absolute must in the financial services sector. However, Boards must collectively ensure that each member has a highly developed awareness of risk and an understanding of the internal and external risks the company is facing. And this is an ongoing requirement, not just a snapshot approach.
swissVR Monitor: Do we need a new understanding of risk management?
Barbara Lambert: In my view, a Board cannot carry out its role and fulfil its responsibilities to different stakeholders if it does not identify and analyse risks and opportunities at an early stage and if it fails to feed risk assessments into its strategic decision-making. However, this requires an appropriate understanding of the risk environment, of the company’s risk management policy and the maturity of that policy, and of the reliability and quality of timely reporting. Open discussion within the Board on risk appetite and the company’s capacity for risk – including, of course, management’s – is also essential.
swissVR Monitor: To what extent can diversity improve a Board’s performance?
Barbara Lambert: Diversity on the Board also needs to be reflected in the skills profile of Board members, who should represent a wide range of expertise, including sectoral knowledge, risk and compliance expertise, international law and taxation, and IT security and digitalisation, as well as the new areas of ESG and geopolitics. This is particularly important during times of crisis – and we are currently in the midst of an unprecedented crisis, with enormous strategic challenges for companies and Boards of all kinds.
Barbara Lambert
Board member at UBS Switzerland, SYNLAB, Implenia and Deutsche Börse
Barbara Lambert completed an apprenticeship in banking in Germany before studying business administration at the University of Geneva. She then spent 20 years at Arthur Andersen/Ernst & Young Switzerland, most recently as Head of Audit Banking and Insurance Clients. Between 2008 and 2018, Barbara Lambert was Head of Internal Audit at the Pictet Group and its Group Chief Risk Officer. She has served on the Board of Directors and the Supervisory Board since 2018, is President of a number of Audit Committees and a member of several Risk Committees. She also works as a freelance consultant. Her current Board mandates include Deutsche Börse AG, Implenia AG, SYNLAB AG and UBS Switzerland AG. Barbara Lambert is a member of the Advisory Board of the Geneva School of Economics and Management.