As a senior policy advisor on the Middle East at the Pentagon and the White House, Colin Kahl has witnessed struggles in the region first-hand. From working to shape the U.S.-led campaign against the Islamic State and the long-term partnership with Iraq to limiting Iran’s nuclear activities to helping craft the U.S. response to the Arab Spring, Kahl knows better than most how important it is to understand this rapidly changing region.

Now that he has joined the Freeman Spogli Institute for International Studies (FSI) as its inaugural Steven C. Házy Senior Fellow, Kahl wants to improve understanding of how developments in the Middle East impact people in the region and security around the globe.

The launch of FSI’s Middle East Initiative provides a first step toward this objective. As the initiative’s first director, Kahl plans to create “connective tissue” for efforts already underway across Stanford.

“There are a number of disparate efforts around campus working on Middle East issues,” said Kahl. “There is a lot of terrific research and engagement going on. My hope is that the Middle East Initiative will serve as a focal point to expose the Stanford community to ongoing work and foster new conversations that are not happening now.”

Many of the Middle East activities already occurring on campus happen at FSI, making it a natural home for the initiative.

“Our scholars are already studying the dynamics of authoritarian regimes in the Middle East, prospects for reform and democracy in the Arab world, ways to counter terrorist activities and promoting economic development,” said FSI Director Michael McFaul. “Stanford students want to dive more deeply into the region’s political, social, economic and technological development. We want to give them that opportunity.”

In the 2018-2019 academic year, FSI’s Ford Dorsey Master's in International Policy plans to begin filling this need by adding a three-course sequence on the Middle East.

Kahl also plans to bring more Middle East scholars from outside Stanford to share their ideas and research.

“I look forward to helping Stanford students and scholars connect and collaborate in ways that enrich our understanding of this vital region,” said Kahl. “Stanford has much to contribute to some of the most pressing policy challenges we face.”

Stanford political scientists Condoleezza Rice and Amy Zegart offer insights about how businesses can most effectively confront “political risks” in an uncertain world where information for customers and clients is now at their fingertips.

While political risks have grown more complex, wisely managing them remains fairly straightforward, two Stanford scholars say.

Political scientists Condoleezza Rice and Amy Zegart explain how a company’s fairy tale can become a nightmare if it fails to take effective measures against “political risk,” the probability that an action or event will significantly affect business, positively or negatively.

For companies, political risk is defined as the probability that a political action will significantly affect their business – whether positively or negatively.

Whether those threats come from government, Twitter, terrorists or activists and hackers, the reality is that political risks can blindside even the best managers if preparatory measures are not taken, say Condoleezza Rice and Amy Zegart, two Stanford political scientists. They co-taught the Stanford MBA course, Managing Global Political Risk, to more than 200 students over the past six years, collecting case studies and research for their course.

Zegart, the Davies Family Senior Fellow at the Hoover Institution and co-director of Stanford’s Center for International Security and Cooperation, and Rice, the Thomas and Barbara Stephenson Senior Fellow at Hoover and a former U.S. secretary of state, feature their findings in the book, Political Risk: How Businesses and Organizations Can Anticipate Global Insecurity. Rice is also the Denning Professor in Global Business and the Economy at the Stanford Graduate School of Business.

Drawing on social science research, interviews with industry leaders and their own experiences, Rice and Zegart explain why political risk is so hard for all organizations to see. They provide detailed examples of best practices and cautionary tales in risk management from leading businesses as well as insights from aircraft carrier operations, NASA’s space shuttle program and professional sports teams.

Political Risk offers a new approach for anticipating, analyzing, mitigating and responding to possible threats that can be applied in any organization.

In an interview, Zegart said that such risk is no longer just about a foreign country’s tax system, regulatory environment or threat of expropriation.

“Instead, security challenges – wars, civil unrest, cyberthreats, terrorism and insurgencies – pose risks and opportunities for global organizations and businesses, which could have catastrophic or – if well handled – beneficial consequences,” Zegart said.

At the same time, globalization and social media have given local people everywhere an ability to spread messages and join in common causes around the world. As a result, politics in one location can have cascading effects elsewhere – whether it’s the spread of Tunisian protests in the Arab uprisings or a campaign to ban the sale of “conflict diamonds” from war-torn African countries.

From fairy tale to nightmare

Consider SeaWorld, the theme park company that in 2013 had just completed an initial public offering that exceeded expectations, raising more than $700 million in capital and valuing the company at $2.5 billion, according to Rice and Zegart.

Eighteen months later, SeaWorld’s fairy tale had become a nightmare. The stock price had plunged 60 percent and top management resigned. Why? A low-budget documentary film examined the treatment of the company’s famed killer whales. Soon, news headlines were excoriating the company, with pressure growing on public officials to regulate the handling of killer whales. Amid the backlash, SeaWorld’s stock fell from $38.92 a share to $15.77 in 2014 – and it has not recovered.

So, how can companies and organizations best manage political risk in our current environment of rapid information? Rice and Zegart suggest a new “framework.”

Understand risks: Companies need to evaluate what their appetite is for political risk. For example, while oil and gas companies undertake long-term investments in distant countries, they might be willing to tolerate more risk than more retail-oriented industries, such as hotel chains and theme parks, that face customers on a daily basis.

Also, they should ask: What is their company-wide understanding about the tolerance of risk? Rice and Zegart suggest companies encourage creative thinking to guard against “blind spots” or groupthink” when it comes to judging risk factors.

Analyze risks: Getting good information about political risks and conducting objective reviews and analyses of those challenges is important, Rice and Zegart wrote. That research can be used to make wiser business decisions grounded in reality. “Getting managers to use rigorous political risk analyses – of any variety – to defend investments can significantly improve decision-making.”

Reduce risk exposure: Organizations need to ask themselves how they can decrease their susceptibility to identified political risks. Also, do good systems and teams exist that can react and handle situations on a timely basis? Also, Rice and Zegart noted, managers can take steps to minimize potential damage long before a crisis unfolds if they plan properly and foresee the likely risks.

Respond to risks: Organizations can learn from incidents where something may have gone wrong. They can use such knowledge to respond more effectively to future crises. “Leaders must react and correct for the human tendency to ascribe close calls to a system’s resiliency when it’s just as likely the near miss occurred because of a system’s vulnerability,” according to Rice and Zegart.

They provide as an example of a wise approach a toy company that in 2006 created a strategic risk management system that helped align views on risk across the company. Leadership set up systematic processes for training all new managers about risk; engaging every important business leader, including the board members, in setting the risk appetite; identifying risks; and integrating risk assessment and reduction into business planning.

They also pointed to a hotel chain that now has a sophisticated security alert system. While the company acknowledges it doesn’t know when or where terrorists may strike next, it has increased preparedness and safety measures in every hotel. The company achieves this by notifying hotel managers about changing conditions that might pose a threat and informing employees what to do in potential cases of risk.

“In the end,” Rice and Zegart write, “the most effective organizations have three big things in common: They take political risk seriously, they approach it systematically and with humility, and they lead from the top.”

On March 7, 2018, CISAC scholar and Hoover Institution Research Fellow Andrew Grotto testified before a bicameral hearing of the California Legislature on “Cybersecurity and California Elections.” Grotto emphasized the importance of upholding the public's confidence in our electoral infrastructure, and highlighted the need for California's state and county election professionals to implement cybersecurity best practices. 

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He also reminded that campaigns and elected officials are also vital components of our nation's electoral infrastructure, and that they too have a responsibility for upholding the public's confidence in our democracy. He emphasized the need for candidates to be vigilant and not allow their campaigns to become unwitting ampflifiers of Russian disinformation efforts. The full testimony is available here.