Geopolitical Shifts Push Indian Companies to Rethink Core Business Risks
India's corporate sector is undergoing a significant shift in how it approaches business threats. A volatile geopolitical environment combined with persistent global supply-chain disruptions is forcing companies to completely rethink their risk management priorities. Sanctions risk has now emerged as one of the top threats facing businesses today.
From Compliance Footnote to Governance Priority
For many domestic firms, sanctions exposure is no longer just a minor compliance issue. Experts confirm it has become a core governance matter with direct and serious implications. This shift affects everything from company cash flows and vendor relationships to financing options and corporate reputation.
The scrutiny is only widening as new restrictions emerge. Recent US sanctions on countries like Venezuela have expanded the compliance minefield for globally connected Indian companies. These join existing sanctions regimes targeting Russia and North Korea, creating a complex web of regulations that firms must navigate.
Expert Warnings and Practical Consequences
Tarun Bhatia, regional managing director and co-head of Asia Pacific investigations at Kroll, emphasizes the growing importance of this issue. "In a world where geopolitics increasingly shapes commerce, sanctions risk deserves the same weight as financial, cyber or climate risks," he states clearly.
Bhatia explains that sanctions compliance goes beyond simply avoiding fines. "It is about protecting a company's licence to operate, its reputation and its long-term value," he notes. Corporate leaders now face expectations to ensure their organizations properly identify and assess sanctions risks, implement robust compliance frameworks, and monitor for potential breaches.
The consequences of failure can be severe. Companies risk regulatory enforcement actions, significant reputational harm, substantial financial penalties, and even criminal liability in some cases. In extreme situations, businesses might lose access to critical markets entirely.
The Global Reach of US Sanctions
A particularly challenging aspect involves the far-reaching nature of US sanctions. An Indian company could still face American scrutiny even if no US entity is directly involved in a transaction. Simply using US dollars to conduct business with a sanctioned party can trigger regulatory attention.
Legal experts report receiving multiple queries from domestic companies facing practical problems. Payments are getting stuck or frozen across international networks. Companies sometimes discover they need to make payments to entities that have recently been sanctioned, creating immediate operational headaches.
Proactive Measures Become Essential
Manavendra Mishra, partner at Khaitan & Co, stresses that companies cannot afford a reactive approach. "The repercussions are staring down on a fair number of Indian companies," he observes. He recommends active monitoring, recalibrating supply chains, and establishing proper sanctions standard operating procedures as essential steps.
Suveer Khanna, partner and head of forensic services at KPMG India, highlights the currency dimension. "Given that the US dollar is the primary global currency for settlements and dominates international trade, corporations cannot ignore US sanctions risk," he explains.
Khanna points to specific responsibilities for corporate leadership. "Indian boards with US touchpoints are required to provide crucial oversight and leadership to their organizations in navigating through the risk of being penalized," he states.
The message from experts is clear and consistent. Indian companies must move sanctions risk management from the periphery to the center of their strategic planning. As geopolitical tensions continue to reshape global commerce, proactive compliance has become a business imperative rather than just a regulatory requirement.
