To the list of threats facing American businesses, add this one: populism.
Increasingly, civil-led protests and actions are disrupting business operations. If leaders don’t give them as much attention as economic risks such as higher inflation and rising interest rates, it could set their companies back just as much, if not more.
Social and public unrest is powerful enough to deny companies access to their own offices and plants. Multinational companies have even more on the line – their brands can suffer from half a world away if they operate in countries with authoritarian leaders. In 2022, the so-called Freedom Convoy protests in Canada disrupted a quarter of all Canada-U.S. trade, choking off car parts headed to Detroit. More than 100 days of protests in Portland, Ore., damaged businesses and caused their insurance premiums to climb.
Populism’s virulent strain can spread within companies, too. That’s especially true in technology-focused firms, where information can be transmitted quickly, dividing workforces and cleaving rank-and-file employees from managers. The consequences are more than just a theoretical drag on morale or productivity. Protests against immigration, for example, are at odds with companies’ need for more employees. And an equal and forceful pushback by left-wing workers and unions sows more division.
If you look back critically, the rising tide of populist movements shouldn’t be considered unforeseen events.
For more than a decade in the U.S., starting with the election of Tea Party candidates, populist ideologies accelerated political activism on the right. The insurrection on Jan. 6, 2021, was a watershed event for the U.S. and a reflection of populist power elsewhere.
The Covid-19 pandemic supercharged political and social ideologies, dividing countries and local communities alike. The corporate world is now in the crosshairs as a fragile global economy stoked by spiraling inflation produces unequal outcomes across societies.
All this takes place against the backdrop of social media. Social media platforms polarize and usher people to information bubbles, which then lead to behaviors that can prompt social unrest. When former President Donald Trump posted on his social media account in March that he would likely be arrested, New York and Washington, D.C., authorities promptly erected barricades to prepare for possible protests.
Populism is often misunderstood, a reason it’s not often viewed as a business risk. Populism is, in a nutshell, a tactic to gain power in a political system. Disregard for the law might be a side effect, but populist movements largely operate within legal boundaries. Still, populism can excite the fringe elements—on the right or the left—of a base. It is those groups that create the risk for business, and for us all in society.
One thing both sides have in common is the reliance on increased political polarization and volatility. A deep disdain for multinational corporations has become a common ideological cornerstone.
Dangers of underinvesting
While some international companies have sought to understand how such threats can hurt their operations, and to develop plans for business continuity and other related strategies, too many are significantly underinvesting in managing those risks largely due to the speed of change. Trying to keep up with strategic shifts makes it difficult to ensure organizations are investing in the areas that will have the biggest impact.
Still others are failing to even ask key questions that the next era of populism poses: What are the specific risks to their firm in every market? How fast are threats likely to escalate? What are plans for dealing with those scenarios? And how do the plans dovetail with the company’s other strategies?
It’s obviously impossible to track and plan for every possible business disruption, but there are a few must-dos:
1. Boards and management have a responsibility to adopt a holistic view of the biggest threats to the organization, and make sure they’re allocating appropriate investment to counteract them.
2. Companies should avail themselves of technology that allows them to monitor, track and plan for populist disruptions—and have humans on hand to interpret the data. Sometimes a large gathering is just a parade. Sometimes it’s more than that.
3. Business units and verticals have to be united and share information. Risk management teams should be working with supply chain chiefs internally while also working with external technology vendors to share information.
Failing to make plans now prevents companies from making excuses later. The populist threat has been brewing for years and has only calcified as the global economy opened up after the pandemic, exposing rifts among classes in society. For those who think the menace is behind us, be forewarned: This movement is just getting started.