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Archives December 2022

How Companies Can Navigate Today’s Geopolitical Risks

Semiconductors are one of the foundations of any modern economy. They’re used in everything from home appliances to automobiles to weapon systems. During the Covid-19 pandemic, however, they suddenly became very hard to acquire. Production of semiconductor chips is concentrated in Taiwan and South Korea, and disruptions to global supply chains meant U.S. companies faced year-long waits for chips. This past summer, Commerce Secretary Gina Raimondo warned that an inability to access Taiwan’s semiconductors would lead the U.S. to a “deep and immediate recession.” In other words, dependency on foreign production is a national security risk for the United States.

This vulnerability is one example of what we call the new national security economy. This paradigm is defined by four factors: 1) deep connectivity within and between societies, which has yielded benefits like globalization while introducing risks related to interdependence; 2) geopolitical competition between the West and China, in which 3) the primary arena is advanced technologies, such as AI and semiconductors; and 4) the private sector is a primary actor in this fight. Semiconductors are just one of many fields in which this dynamic is evident and intensifying.

To navigate this new world, leaders need to update their operating assumptions. Most CEOs came of age during a period of globalization when free markets and trade were assumed to be net goods. But the ground has shifted. Many of the key issues that businesses and leaders are grappling with — supply chain obstacles, trade policies, and the competition for access to technology and markets — are often considered individually, but they’re increasingly driven by the new national security economy. Understanding this paradigm is essential to navigating it.

Going forward, businesses should use this lens to make decisions around who is on their board, how they vet plans, how they weigh politics and national interest in their decision making, and how they think about risk.

Holistic Risk in the New National Security Economy
Connectivity, geopolitical competition, technological innovation, and the evolving role of the private sector all shape business leadership and decision-making. It’s not hard to see how each affects hiring practices, intellectual property protections, location strategies for production facilities, or efforts to secure supply chains. But the ways that they interact, the intensity of their interaction, and the consequences of these changes have created a new paradigm.

One effect of this shift is that companies need to look at risk differently. Most organizations approach risk function by function. For example, a financial institution will employ teams to monitor credit risk, legal risk, market risk, operational risk, and regulatory risk, to name a few. This approach has significant shortcomings. For example, the 2008 Global Financial Crisis demonstrated how this kind of siloed risk management can obscure the cumulative vulnerability in a system.

To be more effective at considering risk in this new paradigm, organizations should consider how the four factors identified above work in concert. This means that they not only need to incorporate a deeper understanding of the impact of geopolitics, but also be able to connect the various dots between political risk and other traditional business risk factors. Politics in some form, be it domestic or geopolitical, now meaningfully impact all forms of business risk today.

Consider two examples:

First, look at how growing tension between the U.S. and China is creating problems for Apple. Concentrating manufacturing in China, where labor costs are lower, and having access to its growing market, made Apple a leading success story of globalization. At present it manufactures some 90% of its devices in China. However, as relations between China and the U.S. have deteriorated, intervention by both governments threaten this success. Recently, for instance, the Biden administration restricted the sale of semiconductor technology to China, and put restrictions on a Chinese memory chip company whose products Apple was reportedly considering using in some iPhones.

The result is that Apple is having to navigate more uncertainty and complications because of the four factors of the national security economy. The connected nature of the world created an opportunity, but also risk for Apple’s business. As U.S. anxieties around China’s advanced manufacturing capabilities — which can be used in weapons systems and supercomputing — have grown, the U.S. government has tried to limit Chinese companies’ access to these technologies. As a result, this geopolitical competition is playing out in the private sector.

Navigating the New Paradigm
While every industry and market is different, there are several steps companies can take to better navigate this new paradigm.

Add experience.
Companies should not only build geopolitical expertise internally, but also look for board members who can improve their ability to interpret and navigate how geopolitics intersects with business. From selecting new board members to hiring recent graduates to ongoing executive training, companies must look to people and learning opportunities to enhance this experience. Many executive education programs focus on traditional business disciplines, but few engage with the intersection of business and geopolitics. The average business executive who studied business administration, engineering, or a similar discipline will likely have a hard time gaining this understanding, so companies should consider hiring board members with more interdisciplinary backgrounds who demonstrate significant exposure to geopolitics along with business insight An additional benefit of this approach is that it can broaden a company’s pool of potential candidates, as recruiters consider candidates who may not have traditionally recruited or hire from programs and schools that have not historically recruited.

Ask the right questions.
A national security economics lens should be applied to most plans an organization makes, from the feasibility of a potential foreign investment to the selection and due diligence of entities in a company’s supply chain. Many things that are seemingly mundane can be risky or complicated when viewed through the lens we offer. This is as simple as asking when considering a decision, “What are the geopolitical implications of the choice we are making?” When you ask a question like this, people can only consider possible events that are low probability, but high impact and plan for contingencies accordingly.

Accept that politics is unavoidable.
Historically, many companies, especially in the West, have tried to separate business and politics. This is now a false dichotomy in many situations, especially in international contexts. Companies are many political actors, in many situations, with a national identity and as such need to understand what constitutes their identity, as well as that of the companies they deal with. For example, a Chinese company may make a deal primarily to acquire new technology, while its Western counterpart is only looking to make money. These are very different assumptions than many western market participants are used to, and require these western companies to update their assumptions.

Consider reputational risk holistically.
The new economy of national security gives rise to other forms of increased reputational risk that can affect a company, whether it is Nokia selling technology to Russia, pressure on companies to withdraw from Russia, Chinese consumers avoiding Western companies that criticize China, etc. . This risk is amplified in our model and companies should be more sensitive to the impact of reputational risk. Doing so requires the ability to connect the dots by giving meaning to seemingly unrelated events, which together can have compound and significant business impact.

The European Commission and WHO are expanding their strategic cooperation to improve the health of all

At the EU-WHO Strategic Dialogue on Health between the European Commissioner for Health and Food Safety, Stella Kyriakides, and Dr. Tedros Adhanom Ghebreyesus, WHO Director-General, the European Commission (EC) and WHO agreed to strategic cooperation in safety and global to improve health architecture. . They will also cooperate in the implementation of important initiatives, such as the new European Union Global Health Strategy launched this week, the European Health Union and the WHO priorities for the period 2022-2026.

The partners will mutually strengthen their work in areas of common interest, as called for by the EU Global Health Strategy, to further strengthen a strong multilateral system with the WHO at its core, driven by a strong EU.

Tackling the challenge of global health security together

Many important elements of global health security will be discussed over the next two years. These include the ongoing negotiations for a future pandemic agreement and amended international health regulations, the establishment of a permanent pandemic platform, the involvement of top global health leaders, and global health funding.

The EC and the WHO will coordinate closely in these discussions to form an effective multilateral system that considers the lessons of the COVID-19 pandemic and provides comprehensive health security for citizens around the world.

“Our citizens expect a step change in global health security, and the new EU Global Health Strategy is our contribution to this process. Combating threats to health effectively requires a strong multilateral governance with a more effective, accountable and sustainably funded WHO at the center and where “The EU has a seat at the table. Strengthened strategic cooperation and coordination between the Commission and the WHO will be essential to deliver better health for all in a changing world,” said Stella Kyriakides, Commissioner for Health and Food Safety.

Other areas of cooperation include cross-border threats to health and digital health. To ensure mutual reinforcement in areas of common interest, both parties will review all current joint projects and actions until May 2023 and identify further areas of cooperation and specific projects to support. Both parties will meet in June 2023 to take stock, define the lines of future joint work and provide political impetus if necessary.

“A healthier Europe is a stronger and more prosperous Europe, and a stronger and more prosperous Europe is a stronger and more prosperous world. We look forward to expanding our cooperation with the European Union in the coming years for a healthier, safer and achieve a more just world,” said Dr Tedros Adhanom Ghebreyesus, WHO Director-General at the launch of the Strategy in Brussels.


The new EU Global Health Strategy provides a framework for EU health policy until 2030. It sets out political priorities and guiding principles to shape global health, and identifies concrete lines of action. It outlines what the Commission will do and what it invites the 27 EU member states to do, each strictly within their respective institutional powers and roles. The strategy is based on input received during a wide public consultation with a wide range of key stakeholders in Europe and beyond.


Alibaba’s international arm is spending millions to expand into South Korea

BEIJING – Alibaba, AliExpress’s international e-commerce business is spending the equivalent of $7 million to reach consumers in South Korea, the unit told CNBC in an exclusive interview.

AliExpress said it launched three- to five-day shipping to South Korea last year, allowing South Korean residents to buy some goods, especially fashion, from Taobao. That is Alibaba’s main e-commerce site in China.

In total, the business unit said it spent 10 billion won in South Korea this year to lower the prices of products. The company wants to “make sure we have the best prices,” said Gary Topp, AliExpress’s European marketing and operations director.

The investment seeks to benefit from a market valued in billions of dollars and currently dominated by the US.

Online purchases by South Koreans from foreign retail sites increased by $1 billion in 2021 to $4.5 billion, with 41% from the US, according to an August report by the US International Trade Administration.

“Although the United States ranks number one in 2020, other countries such as China are expanding their presence in the Korean e-commerce market,” the report says, noting that South Korean consumers now shop in more than 30 countries.

From January to September this year, the number of AliExpress app users among South Koreans increased by 22%, Seoul-based independent data analytics company TDI said.

That brought monthly active users in South Korea to a record 2.72 million in September, TDI said.

AliExpress said it does not comment on third-party data.

Gross merchandise volume in South Korea rose 44% last year and the number of buyers grew 50%, Zhang Kaifu, Alibaba vice president and AliExpress general manager, said at a conference in April. The company confirmed the data, which did not include monetary amounts. GMV measures the total value of sales in a given period.

By August last year, AliExpress was already one of the top five sites used by South Koreans to buy products directly from foreign sellers, according to the Korea Consumer Agency, a government agency. The other sites were Amazon, iHerb, eBay and Q0010.

In recent years, AliExpress has mainly focused on reaching the European market. Public disclosures about subsidies focused on making it cheaper and faster for consumers in Spain, France and other European countries to receive packages.

As the company prepares for its big shopping trip in November, the Singles’ Day shopping event leading up to November 11, it said it will offer two-day local delivery to customers in Spain and France. This fall, AliExpress began rolling out interest-free payment plans for customers in Europe.

China’s Overseas E-Commerce Boost

Alibaba’s rivals at home, especially Pinduoduod TikTok owner ByteDance launched this year in the overseas e-commerce race. China-based startup Shein has already made waves in fast fashion with the combination of its local supply chain and overseas social media.

Global brands drive Restaurant Brands International

Restaurant Brands International, Inc. in the last quarter benefited from strong performance in its international businesses Tim Hortons Canada and Burger King, improvements at Burger King, Popeyes and Firehouse Subs in the United States, continued growth in digital sales and progress in the development of new restaurants.

Net income for the third quarter ended Sept. 30 was $530 million, or $1.17 per diluted share, compared with $329 million, or 70¢, in the prior year period. The increase was due to the benefit of income taxes in the current year compared to an income tax expense in the prior year, increases in segment income in the Tim Hortons and Popeyes segments, the inclusion of income from the Firehouse Subs segment, a favorable change in other operating expenses and the non-recovery of a loss due to early termination of the debt. These factors were offset by unfavorable currency movements, a decrease in Burger King segment revenue, an increase in stock-based compensation and non-cash incentive compensation expense, corporate restructuring and tax advisory fees, and higher interest expense. .

Total revenue advanced 16% to $1.7 billion from $1.5 billion.

“In the third quarter, we increased year-over-year consolidated comparable sales by 9%, driven by 11% comparable sales in Tim Hortons Canada, 15% comparable sales in our international Burger King business and sequential improvements at Burger King. King , Popeyes and local Firehouse Subs Markets,” said José E. Cil, chief executive, during a Nov. 3 call. fourth. “At Burger King US, we saw 4% like-for-like sales and continued to close the sales gap to peers. Our digital channels also continued to contribute to our sales growth this quarter, with global digital sales increasing year-over-year year with a 26% increase to almost $3.4 billion, capturing a third of consolidated systemwide sales.

“We also made strong development progress in the third quarter with Popeyes once again a standout and well positioned for another strong year. Looking ahead, we are confident in our long-term pipeline and expect our development mix to strengthen, Tim Hortons and bringing Popeyes to more and more markets around the world, while taking Burger King to higher levels.

During the quarter, Burger King in the United States increased comparable sales with its value platform, the launch of a crispy chicken sandwich, strategic pricing initiatives and a positive contribution from digital channels, Cil said.

Price increases and menu innovation helped Tim Hortons achieve comparable sales growth of 10% over the prior year. Popeyes’ performance was boosted by expansion of restaurants in North America and various global markets.

“Since 2017, we have added more than 650 net new units to our existing footprint in the local market while leveraging our development expertise and master franchise model to bring nearly 400 new restaurants to international markets,” Cil said of Popeyes. “In the meantime, the team is also preparing to bring Popeyes to major QSR chicken markets such as Indonesia, South Korea and France in the coming months. Our development momentum resulted in 9% net restaurant growth and, along with 3% comparable sales, including 1% of comparable sales in the US, led to system-wide sales growth in the 12% for the third quarter.

Firehouse Subs, which will acquire Restaurant Brands in 2021, posted relatively stable comparable sales while posting strong comparable sales a year earlier, Cil said.

“The brand continued to generate about a third of its sales through digital channels this quarter, helped by successful initiatives such as Rewards Week, which included seven days of exclusive offers and points for our Firehouse Rewards members,” he said. “This was just one of several creative initiatives during the quarter to increase digital engagement while delivering high-quality, delicious products that our customers know and love.”

In September, Restaurant Brands unveiled a plan to improve the performance of Burger King restaurants in the United States, committing to a corporate investment of $400 million over the next two years to support advertising, renovations, technology and digital improvements.

International Business Machines Corporation (IBM) is a trending stock: facts you need to know before you bet on it

IBM (IBM) is one of the most watched stocks by visitors to lately. Therefore, it may be a good idea to review some of the factors that can affect the short-term performance of stocks.

Over the past month, shares of this technology and consulting company have returned +5.7%, compared to a change of +1.8% for the composite Zacks S&P 500. During this period, the Zacks Computer industry – Integrated Systems, in which IBM is located, up to +1.6%. The key question now is: What could be the future direction of the stock?

While press releases or rumors of a substantial change in a company’s business outlook typically cause its stock to “trend” and lead to an immediate price change, there are always a few fundamental facts that ultimately dominate decision-making. buy and hold decisions.

Changes to estimates of earnings

Rather than focusing on anything else, we at Zacks make it a priority to assess the change in a company’s earnings forecast. This is because we believe that the fair value of your shares is determined by the present value of your future stream of earnings.

Our analysis is essentially based on how short-side analysts who cover stocks revise their earnings estimates to account for the latest trading trends. As a company’s earnings estimates increase, the fair value of its stock also increases. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, causing the price to rise. Hence, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, IBM is expected to post earnings of $3.57 per share, indicating a +6.6% change from the previous quarter. The Zacks Consensus Estimate was unchanged over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $9.12 points to a +15% change from the prior year. For the past 30 days, this estimate has not changed.

For the upcoming fiscal year, the consensus earnings estimate of $9.69 indicates a change of +6.2% from what IBM expected to report a year ago. The estimate has not changed in the last month.

With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s near-term price direction by effectively harnessing the power of earnings estimate revisions. . Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, IBM is ranked Zacks Rank #3 (Hold).

The following chart shows the evolution of the company’s 12-month consensus EPS estimate:

Last reported results and upset history

IBM reported revenue of $14.11 billion in the last reported quarter, representing a year-over-year change of -19.9%. EPS of $1.81 for the same period compared to $2.52 a year ago.

Compared to the Zacks Consensus Estimate of $13.73 billion, the reported revenue represents a surprise of +2.72%. The EPS surprise was +1.69%.

In the past four quarters, IBM has beaten consensus EPS estimates three times. The company beat consensus revenue estimates three times during this period.


Without considering the valuation of a stock, no investment decision can be efficient. When predicting the future performance of a stock’s price, it is crucial to determine whether the current price correctly reflects the underlying company’s intrinsic value and the company’s growth prospects.

By comparing the current values of a company’s valuation multiples, such as price-to-sales (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), with its own historical values. help determine whether your stocks are overvalued, overvalued or undervalued. Comparing the company relative to its peers on these parameters gives a good idea of the reasonableness of the share price.

The Zacks Value Style Score (part of the Zacks Style Score system), which pays close attention to traditional and unconventional valuation metrics to rate stocks from A to F (An is better than B; a B is better than a C, etc. ), is quite useful to identify whether a share is overvalued, correctly priced, or temporarily undervalued.

IBM has a B rating on this front, indicating that it trades at a discount to its peers. Click here to see the values of some of the valuation metrics that drove this note.


The facts discussed here and many other information on can help determine whether the market buzz about IBM is worth paying attention to. However, his Zacks Rank #3 suggests he may be working in line with the broader market in the short term.

Zacks calls “best single pick to duplicate”

Out of thousands of stocks, 5 Zacks experts each picked their favorite to skyrocket 100% or more in the coming months. Out of those 5, research director Sheraz Mian picks the one with the most explosive advantage of all.