Sovereign Engagement in a multi-stakeholder reality

Corporate institutions are responsible to shareholders but must also monitor the broader stakeholder environment in which they operate.

There has never been a time when governments have been more powerful than today. In addition to a traditional oversight role, governments have become the largest players in private markets. Public budgets outweigh anything brought by private companies and include substantial procurement opportunities. Public financing dwarfs private lending. And public wealth stores – from pension funds to sovereign wealth – are today’s biggest investors.

The line between the public and private sectors dissipates outside the West. State-owned enterprises (SOEs) dominate. The CEO of a leading company may be the national security advisor of the country in which it operates. Many significant institutions and critical partners are closely intertwined with the official leadership of the state.

Global corporations have taken notice and regularly pursue high-level sovereign engagement. The Davosification of networks has meant that accessibility is no longer the issue it once was. As such, meetings and approaches are often made with haste. Many institutions follow a transactional approach. Yet, sovereign entities in both East and West have much wider interest sets and longer timelines. This mismatch leads to missed opportunities.

Sovereign engagement requires building the right relationships at the right levels, in the right ways, and at the right times. It is an art that also requires strategic depth and tactical deftness. Both informal and formal relationships are critical, encompassing not just the named counterparts but, more importantly, other stakeholders in the ecosystem. Overall, separating both sides of the ledger is essential. Deals do not always follow a linear path.

Effective sovereign engagement is the difference between having a one-off transaction and a multi-year, multi-faceted investment relationship.