Opinion

After New York’s HQ2 Fiasco, Political Risk Is Prime

For companies and investors, Amazon’s decision to cancel plans to put half of its HQ2 in New York City is more than conversation fodder for the water cooler. It is a cautionary tale about the necessity in today’s politicized environment to make sure political and reputational risks are getting the right level of attention in corporate affairs.

The unusual public competition for Amazon’s HQ2, which at times was perhaps more attuned to season 23 of “The Bachelor” than a corporate expansion, made for great publicity as 238 cities and regions applied to bring the 50,000 high-paying jobs and $5 billion in investment to their community. However, with the Seattle-based e-commerce giant’s decision not to move forward with its Long Island City headquarters in New York due to “state and local politicians” who opposed its presence, it appears that the pomp and circumstance may not have made for good politics. Criticized in the public arena “day in and day out” by local politicians who refused to meet with the company, Amazon simply decided that it did not “want to work in [that] environment in the long term.”

Whether something is good politics or not is becoming an increasingly important consideration for organizations traditionally removed from politics, be they companies, investment firms, or nonprofits. In fact, they do not have to be launching a highly public competition to choose the location for a new headquarters. Today’s operating environment has become increasingly politicized as a result of frustrations directed at Washington politicians and a broken governing process, activist groups focused on making the personal into the political, and a nationalized, sensationalized, and relentless media landscape. Amazon’s decision to abandon its plan for the New York City headquarters is notable because it illustrates this fact, and because, despite its significant power and influence, even Amazon was unable to avoid falling victim.

The HQ2 episode demonstrates the need for a new way of thinking for corporate interests and other organizations requiring a supportive governmental and political environment in order to achieve their objectives. As politicization has infused everything from sportswear to chicken sandwiches with politics, so too must an organization’s strategy for achieving their objectives be viewed through a cohesive lens of political risk. But what exactly does this mean?

Assessing the political risk related to a project or objective entails identifying the full range of policymakers, stakeholders, and other key individuals and organizations that may engage in the approval and execution process. Understanding what a network of influence has already said or done related to the specific project or objective, as well as how they are impacting it or have impacted similar ones in the past, provides insights that can be used to mitigate and better anticipate political risk. These insights can then be used to inform a strategy to overcome challenges and achieve the objective at hand as developments unfold. When done proactively and in advance of key decisions, assessing political risk can prevent wasted time, money, and reputational damage in a futile endeavor.

Additionally, when doing due diligence to assess political risk, it also serves as a time to identify and leverage opportunities. Analyzing the stakeholders and influencers surrounding a project, objective, or issue can become a force-multiplier for an organization, allowing it to focus on reaching out and engaging the constituencies that matter so that their message can be amplified with key decision-makers. In Amazon’s case, they could have started with mobilizing the majority of New Yorkers who supported HQ2 in Queens. Seizing opportunities, and making the best decisions and best strategies, always requires having the best information.

There is no way of knowing for certain if the public nature of Amazon’s HQ2 competition was in part responsible for the political risk it attracted, and which ultimately defeated its New York headquarters. However, whether it is attracted or not, political risk has arrived as a crucial factor that must now be taken into account by companies and organizations when making key decisions.

Jeff Berkowitz is founder and CEO of Delve, a Washington-based competitive intelligence firm that has worked with companies to manage political risk, and previously managed research and messaging operations for the White House, several major presidential campaigns, and the U.S. Department of State.

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