International Alliances, Emerging Threats, and the Defense Sector

Are you ready to navigate the intricate maze of geopolitics and its influence on the defense sector? Brace yourself as we, your hosts Spencer Bentley, Devin Florczak, and Terrell Cummings, guide you through the globally connected labyrinth where international conflicts, shifting alliances, and emerging threats shape the future of defense business operations. We'll shine a light on how these geopolitical tremors can alter the course of defense contractors' bottom line, and the adaptations required to ensure operational continuity and alignment with the broader defense goals. 

That's not all - we take a deep breath and dive into the sensitive realm of dealing with the government, how potential sanctions can sway international business operations, and the utmost importance of aligning strategic goals with national security objectives. We also stir up a conversation on the challenges and opportunities of fostering international collaborations in a world that's becoming more and more interconnected every day. Stay tuned as we ponder over the implications of potential partnership losses due to geopolitical shifts, and share insights on navigating the complex geopolitical landscape to establish and sustain these crucial alliances.

• Hosted by: Terrell Cummings & Devon Florczak
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Transcript

Speaker 1: 0:21

Welcome back to the country intelligence report. We are your hosts, spencer Bentley, devin Florczak and Terrell Cummings. Today we're going to be speaking on a topic that is especially timely Given the dearth of events that have happened over the last few months, with international conflicts springing up everywhere, from, obviously, palestine and Israel to parts of sub-Saharan Africa with Sudan, and really all over the world. We wanted to explore the unique intersection of geopolitics and business operations as they pertain to the defense sector. Obviously, the defense sector is unique among business sectors in that it directly ties into the government, especially at this particular inflection point. So we thought it'd be a very informative discussion to have on how certain impacts in the geopolitical realm can affect the bottom line of defense contractors. And we will jump right into it.

Speaker 1: 1:43

The defense sector operates within a global context. Obviously, from shifting alliances to emerging threats, international events significantly impact the strategies and operations for both the Department of Defense and its contracting partners like country intelligence group. How do these geopolitical shifts influence the decision making process within the federal contracting space and how can businesses anticipate and adapt to these changes in a proactive manner, ensuring both operational continuity and alignment with the broader defense objectives? This is a broad question, but I'll just tee it up for the group to tackle here.

Speaker 2: 2:26

Yeah, and it's pretty obvious that geopolitical events can significantly influence business operations. Any regulations that come about based on what's going on in the world, and obviously only policies that come about. Since we are a United States company, you might be subject to things that our government is going to say we can and can't do with either the government ourselves or other governments in the world. One of the things that, regarding geopolitics and what's going on in the world, the first one that comes to mind is just sanctions. Obviously we can't really do business with China. We can't do business with any sort of country that's on a sanction list, for us at least. I don't know.

Speaker 2: 3:33

I guess I don't want to say we're lucky, but we haven't really expanded our services abroad, but I do know that it is something that a lot more companies are doing, especially with Europe. I think for sure that we've seen many other small business contractors go over to London, in the UK at least expand their analytic services over there, and vice versa as well. Just some of the contracts that I've looked at in the past couple of weeks for incumbents there's been some foreign companies per se that have held these before. I think it's definitely interesting, but as far as what's going on in the world. It's obviously something for us to consider, since doing business with the Department of Defense is an international business.

Speaker 1: 4:39

Yeah, that's for sure. There are obvious sensitivities that come along as a price for doing business with the government that we always have to consider in the defense sector. Trying to track and anticipate and adapt to these moving changes is really something that all entrepreneurs looking to enter into the space have to be very cognizant of. It just is a fact that, at any given moment, your realm of potential clients, as it pertains to the international sphere, can narrow quite quickly based off of our government's overall defense strategy.

Speaker 1: 5:35

If, in 2017, you are expanding your, your business, to Russia and now, in the wake of the Russo-Ukrainian war, russia has become sort of persona non grata to the United States government, you have to understand that that lane of business is now closed for you.

Speaker 1: 6:00

These are things that you really have to take into account when you consider if you really wanted to do business as a contractor with the Department of Defense specifically and you know these these shifts are going to happen. Whether they impact you directly or not is obviously something that is situational and contextual, but you really do have to understand that, as a business, as a contractor for the Department of Defense, your business's strategic goals have to always align with the national security goals of the country and if there is any friction point, you will not win and that and that sort of tug of war and not you, unless you really plan on no longer doing business with the government. So yeah, it's unique to our sector, but it's something that really should not come as a surprise and not be taken lightly by individuals in this space.

Speaker 2: 7:09

Yes, and speaking about Russia, I thought it was not funny but kind of funny when you know McDowell said that you know they were withdrawing, you know all their stores from Russia and then you started seeing pictures of, like the Russian rebranding McDonald's and you know, literally it's just still like McDonald's, but it was just Russian.

Speaker 1: 7:35

Yeah, welcome into America fans. But no, that's, yeah, that's, that's true, it's unfortunate, you know. Obviously I'm sure McDonald's took a hit they're not even, obviously, contractors with the Department of Defense but they took a hit. They took a noticeable hit, I'm sure, to their bottom line with having to close off that entire market, be it, you know, permanently or temporarily. But that that's just that. That that's what happens, you know, and those, those decisions are largely out of the control of, you know, the McDonald's CEO, just as much as they're out of the control of a defense contractor CEO. You know it's, it's something that is just the way of the world and, honestly, with the increase in conflicts sort of internationally, I suspect that a lot of these, a lot of these sort of situations where markets are suddenly closed to business for American business owners, will will continue to, will continue to happen and may in fact increase into the future.

Speaker 2: 8:43

So yeah, I thought it was interesting that even some contracting firms were actually doing business in Russia prior to this. You know Deloitte, pwc, mckinsey, looks like Bayne was doing some work as well, and it looks like all of them were working, you know, with Russia's. You know state department or central federal department as well, which that seems kind of strange to me.

Speaker 1: 9:16

But yeah, I mean, unless we're in direct opposition to adversarial governments, the United States isn't one to lightly close off a market. We've done plenty of work in the Middle East with Pakistan, even though they were sort of persona non grata for a long time. We've done work. They're contractors that have worked with inside of Afghanistan during the war. I don't think the federal government takes lightly the fact that it has a responsibility to as much as it can facilitate business operations for companies that operate out of the states to operate internationally. But once they close that off it's closed. There is no breaking that wall. But the idea of collaborations also has to be discussed here because in a realm where international partnerships can sort of significantly amplify capabilities and resources, I wonder how geopolitics shape the collaborations between US defense entities and their global counterparts. It could be the fact that there is some sort of value driven partnership between two internationally based firms, one in the States, one in China, or one in the States, one in Russia, prior to the Ukrainian war. That opportunity can really be crucial to the development of both firms and it's just closed off due to circumstances out of their control.

Speaker 1: 11:23

I wonder how the defense sector and the federal contractors may be able to navigate the complex geopolitical landscape in a way that can establish and sustain these partnerships or, if that's even possible. What are the challenges and opportunities presented by fostering these collaborations? Because we're living in an increasingly connected, interconnected world, especially as it pertains to things like international logistics. We saw how interconnected that was during the lockdown, during the pandemic. It's crucial, not just for the American market but for international markets, that these partnerships persist in some way. It's kind of scary to think that, due to the whims of government actors, a lot of these very valuable and increasingly paramount relationships can be just brought to a halt due to whatever sort of disagreement may be happening at the time. I wonder what you all think about that, specifically the impact of potential partnership loss as it pertains to geopolitics.

Speaker 2: 12:55

Yeah, regarding current events, especially what's going on in the Middle East with Israel and Hamas, obviously it seems like the majority of companies and contractors in the space do support and do work with Israel. Obviously they might be naturally aligned with Israel, but obviously there are people who take issue with that, both abroad and here in the United States. I think it's pretty tricky when certain geopolitical events, like what's going on in Israel, happens to have your business aligned with a certain event, but it's not something that you want to encourage happening. So I think it's just very tough in general sort of tendering and, I guess, keeping in mind what's happening in the world, but keeping the forefront of your business and making sure that your business isn't really, I guess, being considered negatively across the world, if that sort of makes sense.

Speaker 1: 14:31

Yeah, that makes sense. I think that, honestly, the world is going to have to start to reach some understanding that there are certain international pathways that simply need to persist in order for the larger global order to sustain itself. I keep going back to how the pandemic interrupted logistics all over the planet, and during the sort of the sunsetting of the pandemic, we had the Russo-Ukrainian war breakout, which further complicated a lot of logistical issues between not just partner nations but nations that may be adversarial governmentally but still had some economic ties, case in point being the United States and its reliance on the inclusion of Russian oil into the market in order to maintain stability. Those sort of secondary connections are not inconsequential. In fact, they can have pretty acute impacts on everyday life for Americans. And even if the partnership isn't as significant as the one between the Russian government and the United States, it can still certainly be the fact that these sort of conflicts can just kind of turn the lights off on all sorts of paths of development, paths of increased sort of economic value for firms that are partnering together, and it really just dampens the entire economic landscape when these conflicts and these issues continue to stifle growth and innovation between countries.

Speaker 1: 16:48

I was thinking about. There was an article a few months back that highlighted basically the regression of technological advancement in the internet because a lot of Chinese firms that had a focus on, I believe it was some sort of software development that traditionally partnered with the United States, had been ordered to stop directly ordered to stop, and it just sort of highlighted the domino effect that that would have on the basic infrastructure of the internet and how these sort of background partnerships that have been allowed to exist outside of geopolitics are now being looped into geopolitics and having a direct negative impact on everyday life. So, especially as things become more nationalistic, as certain countries start to become more insular, I think we're looking at a future that shows a lot of regression in progress and across the board. So something to take into account if you're in a space for short.

Speaker 2: 18:22

Yeah, and obviously this impacts businesses as a whole, but I think it also impacts the people that are working for the government either your contractor or civilian or military.

Speaker 2: 18:35

We saw the new sort of questionnaire come out from the DoD regarding the cryptocurrency, and it was pretty much a short survey that said and asked if you hold any crypto and, if you do hold any crypto, do you hold any on exchanges or platforms that aren't based in the US? And, if you do, are those exchanges or platforms based on countries that we might not be friendly with right now, such as China or someplace in the Middle East as well? So I think there's just a, as everything starts getting more online, there's those sort of issues as well, where the government sort of has a slippery slope, where I don't think they really want to control where people put their money. But it's not great if people are investing in things or having money on things that's being paid for by the US government and being held by platforms or companies that are in countries that do have these sanctions. So I think that's kind of interesting and that'll be something that the US as a whole is probably going to be monitoring a lot more closely in the next few years.

Speaker 1: 19:58

Yeah, I think. Yeah, it goes back to that, the notion of insulation, because as these pipelines and these partnerships dwindle away for one reason or another, they have to be supplemented with some sort of safety net. The development of crypto is over-reliant on Chinese computing power and China decides to cut off that avenue. America has to then supplement it with something domestically and while that may seem, I think, appealing, that's also pretty much the basis of nationalism and we all know how that tends to play out. So definitely, you know my continuous ground with a lot of the developments and I think we're seeing that the beginning of a new era not quite sure what that's going to look like, but you know that the time of you know the, the liberal free market and you know free trade and all of that.

Speaker 1: 21:24

I think that is slowly, slowly coming to an end and the Continued sort of proliferation of Nationalists you know leaders across the globe, in the global south, in Asia and in parts of Eastern Europe, show that this trend isn't going away anytime soon. So All of these things need to be considered. You know, just bringing it back. You know, when you're talking about partnering with the Department of Defense, you have to understand that you have exposure to all of these things, all of these relationships that Exists on a on a temporary basis, that are Behold into voters, behold into you know, external factors. You have to take that into account.

Speaker 1: 22:20

It's not a normal business setting, so Definitely something to to discuss here. But this is. This was a fascinating conversation. I think we can add a lot more to this as we Continue to share our experience as a defense contractor. We will leave it here for now. Thank you for listening to the country intelligence report until next time. Thank you for listening to the country intelligence report. Please like and subscribe to stay on top of the latest developments with the show. For more information on the country intelligence group, please visit our website at wwwcountryintelcom. You can also be found across multiple social media platforms at countryintelcom.