Geopolitical Risk Is No Longer a Checkbox — It's a Central Driver of Vendor Decisions
The New Risk Reality
Geopolitical risk has largely been a check box item in organizations' IT risk management documents, until now . As geopolitical tensions hit an all-time high with the tariff wars as well as the ongoing Russia-Ukraine and Israel-Palestine conflicts, the theoretical frameworks are now being widely tested in the real world .
The Microsoft Suspension: A Warning Trigger
No risk management framework and business continuity plan would have prepared Nayara Energy (an oil refinery company backed by Russia's Rosneft) for the sudden suspension of Microsoft's cloud services following the EU sanctions on Russia. This one incident might be an exception pointing to one extreme, but nevertheless a warning trigger .
Why Geopolitical Risk Matters
Sanctions and Trade Restrictions
Sanctions, tariff wars and trade restrictions are impacting nearly all geographies . These risks will increasingly wield stronger influence on CIOs' decisions around how they assess their vendors, draw up contracts and conduct audits .
Hidden Risks
A company may appear operating solely within one jurisdiction but might have a parent company or key investors subjected to regulations from a different country .
Service Suspension
Bans on technology companies serve as clear examples of services being abruptly restricted due to regulatory actions .
Integrating Geopolitical Risk into VRM
Vendor Assessment :
- Evaluate geopolitical exposure of technology partners
- Screen vendors and their parent companies for sanctions
- Evaluate connections with sensitive regions
- Assess vulnerability to sanctions
- Evaluate dependencies on other potentially high-risk third parties
Continuous Monitoring :
- Stay informed of evolving global regulations
- Use threat intelligence feeds and news monitoring
- Use specialized risk assessment platforms for real-time alerts
- Monitor sanctions lists and political risk indices
Contractual Protection :
- Stronger vendor contracts covering data access, suspension triggers and emergency continuity
- Very strong force majeure clause to include geopolitical aspects
- Options to pause services or promptly terminate if vendor is sanctioned
Vendor Diversification :
- Avoid over-reliance on a single vendor from sensitive regions
- Enlist alternative vendors for critical services
- Identify plan B vendors upfront
The Strategic Shift
"Vendor risk can no longer be assessed solely from a technical or procurement perspective. Geopolitics must be a central consideration in organizations' digital infrastructure decisions" .
Proactive Strategies
Vendor Diversification: Avoiding over-reliance on a single vendor from sensitive regions helps ensure operational resilience .
Plan B Vendors: "For critical services, identify a plan B upfront. This could be a different vendor or an internal capability. If geopolitical risks are elevated and have the potential to impact your suppliers, proactively engage with your identified plan B vendors" .
Collaboration: Collaborate with legal, policy, risk and procurement teams to co-own vendor onboarding and risk mapping .
Conclusion
Geopolitical risk is no longer a peripheral issue for CIOs. Organizations must integrate geopolitical risk into assessments, contracts and monitoring to ensure business continuity .
Action Items for Your Organization
- Integrate geopolitical risk into vendor assessments
- Screen vendors and parent companies for sanctions
- Review and strengthen vendor contracts
- Diversify critical vendors
- Identify plan B vendors
- Monitor geopolitical developments continuously
Geopolitical Risk Is No Longer a Checkbox — It's a Central Driver of Vendor Decisions
The New Risk Reality
Geopolitical risk has largely been a check box item in organizations' IT risk management documents, until now . As geopolitical tensions hit an all-time high with the tariff wars as well as the ongoing Russia-Ukraine and Israel-Palestine conflicts, the theoretical frameworks are now being widely tested in the real world .
The Microsoft Suspension: A Warning Trigger
No risk management framework and business continuity plan would have prepared Nayara Energy (an oil refinery company backed by Russia's Rosneft) for the sudden suspension of Microsoft's cloud services following the EU sanctions on Russia. This one incident might be an exception pointing to one extreme, but nevertheless a warning trigger .
Why Geopolitical Risk Matters
Sanctions and Trade Restrictions
Sanctions, tariff wars and trade restrictions are impacting nearly all geographies . These risks will increasingly wield stronger influence on CIOs' decisions around how they assess their vendors, draw up contracts and conduct audits .
Hidden Risks
A company may appear operating solely within one jurisdiction but might have a parent company or key investors subjected to regulations from a different country .
Service Suspension
Bans on technology companies serve as clear examples of services being abruptly restricted due to regulatory actions .
Integrating Geopolitical Risk into VRM
Vendor Assessment :
- Evaluate geopolitical exposure of technology partners
- Screen vendors and their parent companies for sanctions
- Evaluate connections with sensitive regions
- Assess vulnerability to sanctions
- Evaluate dependencies on other potentially high-risk third parties
Continuous Monitoring :
- Stay informed of evolving global regulations
- Use threat intelligence feeds and news monitoring
- Use specialized risk assessment platforms for real-time alerts
- Monitor sanctions lists and political risk indices
Contractual Protection :
- Stronger vendor contracts covering data access, suspension triggers and emergency continuity
- Very strong force majeure clause to include geopolitical aspects
- Options to pause services or promptly terminate if vendor is sanctioned
Vendor Diversification :
- Avoid over-reliance on a single vendor from sensitive regions
- Enlist alternative vendors for critical services
- Identify plan B vendors upfront
The Strategic Shift
"Vendor risk can no longer be assessed solely from a technical or procurement perspective. Geopolitics must be a central consideration in organizations' digital infrastructure decisions" .
Proactive Strategies
Vendor Diversification: Avoiding over-reliance on a single vendor from sensitive regions helps ensure operational resilience .
Plan B Vendors: "For critical services, identify a plan B upfront. This could be a different vendor or an internal capability. If geopolitical risks are elevated and have the potential to impact your suppliers, proactively engage with your identified plan B vendors" .
Collaboration: Collaborate with legal, policy, risk and procurement teams to co-own vendor onboarding and risk mapping .
Conclusion
Geopolitical risk is no longer a peripheral issue for CIOs. Organizations must integrate geopolitical risk into assessments, contracts and monitoring to ensure business continuity .
Action Items for Your Organization
- Integrate geopolitical risk into vendor assessments
- Screen vendors and parent companies for sanctions
- Review and strengthen vendor contracts
- Diversify critical vendors
- Identify plan B vendors
- Monitor geopolitical developments continuously
