Volume 26 Issue 4 Thematic Issue: Risk Management Practices of European Companies in Times of High Global Uncertainty Article 1 December 2024 Risk Management Practices of European Companies in Times of Risk Management Practices of European Companies in Times of High Global Uncertainty High Global Uncertainty Katja Zajc Kejž ar University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia, katja.zajc@ef.uni-lj.si Darja Peljhan University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia Peter Trkman University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia Anastas Vangeli University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia Danijela Miloš Sprč ić University of Zagreb, Faculty of Economics & Business, Zagreb, Croatia Follow this and additional works at: https://www.ebrjournal.net/home Part of the International Business Commons, Operations and Supply Chain Management Commons, and the Strategic Management Policy Commons Recommended Citation Recommended Citation Zajc Kejž ar, K., Peljhan, D., Trkman, P ., Vangeli, A., & Miloš Sprč ić , D. (2024). Risk Management Practices of European Companies in Times of High Global Uncertainty. Economic and Business Review, 26(4), 222-225. https://doi.org/10.15458/2335-4216.1345 This Editorial is brought to you for free and open access by Economic and Business Review. It has been accepted for inclusion in Economic and Business Review by an authorized editor of Economic and Business Review. EDITORIAL Risk Management Practices of European Companies in Times of High Global Uncertainty I Katja Zajc Kejžar a, * , Darja Peljhan a , Peter Trkman a , Anastas V angeli a , Danijela Miloš Sprˇ ci´ c b a University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia b University of Zagreb, Faculty of Economics & Business, Zagreb, Croatia Introduction I n recent years, global uncertainties have steadily increased. Rising geopolitical rivalry, coupled with global technological, climate, and security risks, along with growing concerns over the social and envi- ronmental costs of free trade, are undermining the already weak foundations of the postwar multilateral Bretton Woods system (United Nations Conference on Trade and Development, 2023). These challenges increasingly cast doubt on the core principles of the global trade system that has long supported interna- tional economic stability. Without a credible global institutional framework to combat climate change, regulatory discrepancies between countries and vary- ing levels of commitment to a climate-neutral world are creating an uneven playing eld. The private sec- tor faces a range of challenges, including regulatory hurdles, market and economic uncertainties, legal complexities, and rising administrative and compli- ance costs (World Economic Forum, 2024). These challenges are particularly acute for internationalized companies operating in multiple countries, as policies change rapidly, and approaches differ between coun- tries. Businesses are increasingly compelled to operate amid disruptive geopolitical pressures. When op- erating across borders, they encounter incentives created by policy intervention and existing interna- tional norms that push and pull them in different directions (Evenett & Pisani, 2023). Given current global developments, geopolitical risks are becom- ing a critical aspect of supply chain risk reliance as well. The US–China trade and technology war, the COVID-19 pandemic, and the wars in Ukraine and the Middle East have exposed vulnerability to global supply chain disruptions and intensied back- shoring, friendshoring (i.e., shifting supply chains to “trusted countries”), and decoupling of global value chains, even though the economic fragmentation pro- cesses have been estimated to be costly (Eppinger et al., 2021; Felbermayr et al., 2023; Javorcik et al., 2024). With multilateralism weakening, companies increasingly rely on regional economic integration processes. As Alday (2022) warned, multinationals that regionalize to take advantage of the lower risk that regional economic integration initiatives offer may, on the other hand, increase their regional risk by deepening their commitment and embeddedness in regional business networks. Such a regional risk paradox raises questions about the balance between regional value chains and global diversication, as well as about the benets and pitfalls of friendshoring and backsourcing strategies. European companies are far from immune to these global geopolitical developments. The EU member states are highly open economies that are intensively integrated into European and global value chains. The domestic markets of most Member States are relatively small, and companies are forced to enter I Disclaimer: Funded by the European Union. The views and opinions expressed are, however, those of the author(s) only and do not necessarily reect those of the European Union or the European Education and Culture Executive Agency (EACEA). Neither the European Union nor EACEA can be held responsible for them. Available online 10 December 2024 * Corresponding author. E-mail address: katja.zajc@ef.uni-lj.si (K. Zajc Kejžar). https://doi.org/10.15458/2335-4216.1345 2335-4216/©2024SchoolofEconomicsandBusinessUniversityofLjubljana. ThisisanopenaccessarticleundertheCCBY-NC-NDlicense(http://creativecommons.org/ licenses/by-nc-nd/4.0/). ECONOMIC AND BUSINESS REVIEW 2024;26:222–225 223 other markets, either within the EU or at the global level. Therefore, risk management in global markets emerges as one of the most important success factors for internationalized European companies (Braito et al., 2021). Small and medium-sized enterprises (SMEs) are particularly vulnerable and disadvan- taged in such situations, due to limited options to diversify their business activities and tougher nan- cial conditions to manage risks (Hsu et al., 2013). Resource constraints may also limit SMEs’ ability to engage heavily in a foreign market, and they are often less willing to share control with a partner, especially if they are family-owned and/or owner- managed (Laufs & Schwens, 2014). Past crises have taught the harsh lesson that most corporate failures result from poor risk manage- ment (Rutledge, 2009), underscoring that no aspect of corporate governance is more critical than ef- fective risk oversight (Zhivitskaya & Power, 2016). However, it seems that companies have not prop- erly responded with the implementation of suitable risk management practices (Gennaro & Nietlispach, 2021). Companies implement risk management sys- tems depending on their needs and choices. It is now known that risk indicators have to be linked to a strategy to help managers monitor and evaluate orga- nizational progress towards strategic goals (Arena & Arnaboldi, 2014). Also, the recent revision of the well- known framework by the Committee of Sponsoring Organizations of the Treadway Commission (2017) highlights the importance of integrating enterprise risk management with the company’s strategy and performance (Dvorski Lackovi´ c et al., 2022). How- ever, studies show that risk management systems are still mainly implemented to meet regulatory require- ments (Lundqvist, 2015) and not strategic alignment (Peljhan et al., 2018); therefore, the potential effect of strategy remains insufciently researched and of- fers avenues for further research (Peljhan & Marc, 2021). Future studies should inform risk managers especially on how they can achieve integration of risk management systems with strategy, leading to risk- based (strategic) performance management (Smart & Creelman, 2013). When it comes to international business operations, the nature of political risk differs signicantly among emerging markets (Ali et al., 2021). Furthermore, cultural risk can increase the liability of foreign- ness or adversity that the investing company must overcome when expanding abroad (López-Duarte & Vidal-Suárez, 2010). Consequently, the risk manage- ment practices applied differ from market to market. However, in most companies, political risk manage- ment is reactive and not linked to enterprise risk management (Jones & McCaffrey, 2021). While man- agers increasingly regard geopolitics as relevant to their activities, for many companies this insight has not yet resulted in changes to their behaviour. How to be proactive, take a cross-functional approach to polit- ical risk management, and integrate it into enterprise risk management are important questions. This thematic issue aims to present fresh per- spectives and actionable insights on balancing risks and opportunities, linking them to strategic decision making in international business. It is part of an ERASMUS Jean Monnet Module, EUglobe, which is dedicated to generating and disseminating knowl- edge and best practices to enhance the competitive- ness of EU rms in turbulent global markets, with a particular emphasis on enhancing rms’ capacities for effective risk management in international op- erations. The articles in this issue draw from both empirical and theoretical research, covering various facets of the complex process of managing risks within the VUCA (volatile, uncertain, complex, and ambiguous) environment. The ndings and examples provided offer valuable, evidence-based recommen- dations for risk management practices, as well as implications for supporting institutions, policies, and instruments. Additionally, this issue might serve as a springboard for inspiring practical and innovative tools that contribute to a robust risk management toolkit for international business. The papers in this issue The rst article, titled “Change Is in the Minds of the Beholders: A Sociocognitive Comparison of Crisis Perceptions and Change Predictions: Insights from China, New Zealand, and Slovenia,” by Ding and Raškovi´ c explores how social cognition inuences crisis perceptions and economic change predictions in the context of the COVID-19 pandemic across China, New Zealand, and Slovenia—three countries with distinct sociocultural and institutional backgrounds. The study, which surveyed Generation Z’s perception of economic change across various scenarios (acceler- ated growth, decelerated growth, accelerated decline, and decelerated decline), highlights that while the East–West demarcation in terms of cultural bound- aries provides useful insights, it is insufcient for fully understanding culturally driven economic trend predictions. During economic downturns, such as the COVID-19 crisis, there appears to be a univer- sal tendency towards pessimism. However, Chinese respondents displayed the least negative outlook in decline scenarios, suggesting a more dialectical thinking approach to adverse conditions. In con- trast, signicant differences in terms of “geography of thought” emerge during economic expansion. While 224 ECONOMIC AND BUSINESS REVIEW 2024;26:222–225 New Zealanders exhibit more caution in decelerated growth scenarios, hesitating to assume continued eco- nomic expansion, Slovenian and Chinese respondents display optimism regarding economic expansion in both accelerated and decelerated growth scenarios. The paper offers valuable implications for develop- ing culture-specic crisis management strategies and promoting economic resilience. In the second article, titled “Risk Management in MNEs during Global Crises: Subsidiary Control or Autonomy?,” Jakliˇ c, Koleša, Mavri, and Burger explore the balance between central control and au- tonomy within multinational enterprises (MNEs) and how this impacts their subsidiaries’ resilience and risk management during global crises, specically focus- ing on Slovenia as a case study. The authors investi- gate how the autonomy of foreign subsidiaries in Cen- tral and Eastern Europe affects their performance dur- ing the COVID-19 pandemic and the war in Ukraine. Their ndings highlight that greater subsidiary au- tonomy, especially in risky markets, enhances re- silience and allows for more exible and proactive risk management. Autonomy enables subsidiaries to adapt better to local challenges; it does not guar- antee success, however, and must be complemented by other strategic measures. The study emphasizes that MNEs facing global uncertainties prioritize em- powering their subsidiaries in emerging markets by granting them increased autonomy, which can lead to both survival and growth in turbulent times. The third article, titled “Engaging with Geopolit- ical Uncertainty: Discursive Riskwork and Western MNEs’ Divestment Announcements at the Onset of the Ukraine War,” by Mavreti´ c and Vangeli examines geopolitical risk management practices through a the- matic analysis of public statements by Western MNEs that announced intentions to divest in response to the Russian invasion of Ukraine. Adopting a discur- sive riskwork framework, the paper demonstrates how Western MNEs justify and frame their divest- ment decisions within a novel geopolitical context, highlighting a sense of responsibility, motivations for divestment, divestment modalities, and the antici- pated impact. The ndings reveal that Western MNEs align their actions with emerging liberal geopolitical norms and values, positioning themselves rhetori- cally as responsible geopolitical actors. The article proposes a geopolitical riskwork framework that seeks to expand corporate capacities for geopolitical responsibility, moving beyond mere compliance with sanctions and reputation management. In the fourth article, titled “An Integrative Framework for Coopetition-Based Scenarios,” Budler develops an integrative framework to help supply chain actors strategically manage coopetition— relationships that involve simultaneous cooperation and competition. Drawing on the resource-based view and game-theoretic approaches, the article identies various coopetition scenarios based on different levels of resource complementarity and the duration (lastingness) of coopetitive relationships among supply chain actors. This framework deepens the understanding of coopetition dynamics, enabling supply chain actors to sustain mutually benecial exchanges, engage in effective contingency planning, and enhance resilience across different stages of supply chain networks. Conclusions and acknowledgments The four articles in this thematic issue underscore the need for risk management practices to evolve in response to a complex and rapidly changing global environment. Moving away from traditional, rigid models, organizations must adopt more exible, de- centralized, and socially, culturally, and geopolitically responsive strategies. These papers offer valuable in- sights into achieving this through empowering local decision making, cultural sensitivity, values-driven geopolitical considerations, and strategic coopetition within networks. In preparing this thematic issue, we gratefully ac- knowledge the support of our colleagues. We owe a special thanks to Jerneja Kos for her administrative assistance and her efcient management of all stages of the review process. We are particularly thankful to Professor Mojca Marc, the Editor of EBR, for the opportunity to serve as guest editors and for her strong support in the preparation of this issue. We would like to express our sincere gratitude to the anonymous reviewers who dedicated their time and expertise to provide insightful and constructive feed- back for this thematic issue. Lastly, we acknowledge the authors of the articles for their valuable contribu- tions, which have enhanced our understanding of the complex challenges and effective practices of Euro- pean companies in managing risks during periods of heightened global uncertainty. We hope this issue will serve as a valuable resource for scholars, practitioners, and policymakers as they navigate the complexities of the global risk landscape in the years ahead. Guest Editors References Alday, S. S. (2022). 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