02 Risk

The new national security imperative

Russia’s invasion of Ukraine has galvanised the West and accelerated the world’s division into competing political blocks. This will have greater implications for global businesses than any national security event since September 11, more than two decades ago.

Australian banks and companies will be required to remove “enablers” from their client books and asset registries – including Russian oligarchs, family members, banks, and the central bank. An indirect impact will be the profound recalibration of how risk management processes are applied to engagements and interactions with the authoritarian world.

The West’s forceful response to Russia’s war in Ukraine is a powerful new force-multiplier to the national security realignment initiatives that have flowed since 2016. These initiatives include, but are not limited to: the 2016 Cyber Security Strategy; 2017 Telecommunication Sector Security Reforms; 2018 Espionage and Foreign Interference Act; 2020 Foreign Arrangements Scheme and Foreign Investment Review Board reforms; 2021 Universities Foreign Interference Taskforce Guidelines; 2021 AUKUS trilateral security pact; and most recently, 2022 Critical Infrastructure Security and Protection legislation. With the clarity of hindsight, these have been Canberra’s response in real time to the expanding extra-territorial ambitions and reach of authoritarian powers. Specifically, that of the People’s Republic of China.

Foreign interference is the common denominator. In 2022, Home Affairs Minister Karen Andrews has stated that the Critical Infrastructure Bill will require company directors to attest that they are considering and managing risks of foreign interference.

Accordingly, we are working with our clients to integrate different arms of risk management – legal, cyber, physical, personnel, counterparty due diligence, conflicts of interest – under a single integrated “security risk” umbrella. This integrated approach to risk management is driving new strategies and policies in relation to international market diversification, cyber security, money laundering, misinformation, supply chain security, modern slavery, trusted insider threat, IP protection, and Environmental Social and Governance (ESG) frameworks.

Australia’s national security initiatives have been framed in country-agnostic terms but none can be explained without reference to vectors of foreign interference. Now, with China and Russia signing onto a new strategic pact that “has no limits”, company leaders need to bring geopolitical risks to the top of their security and management agenda. Complacency will be dangerous – legally, commercially and reputationally.