DLA Piper (Canada) LLP | View firm profile
Boards face new risks as political decisions, not markets, reshape global business oversight
Boards have always understood market volatility. Interest rates move, currencies swing, and commodity prices rise and fall. What has evolved is not the existence of risk, but its source. Presently, some of the most decisive threats to enterprise value arise not from markets, but from political decisions taken by governments and regulators across multiple jurisdictions.
National security reviews, energy-related policy decisions, sanctions designations, forced labour prohibitions, export controls, and tariff escalation can close markets, freeze assets, derail transactions, and disrupt supply chains with little notice. These are no longer peripheral compliance issues. They are strategic forces that shape corporate outcomes and demand sustained board attention.
The rise of economic statecraft
Governments are increasingly using economic tools to advance national security (including energy security) and foreign policy objectives. In Canada, national security reviews under the Investment Canada Act (“ICA”) operate through two distinct review streams. Under the net benefit review, the Minister may require undertakings and impose conditions as a term of approval. Under the national security review, which can apply even to completed investments, the Governor in Council can block a proposed investment outright, require divestiture, or impose conditions without any obligation to approve. Both streams carry penalties for non-compliance, but the risk profile, timeline, and available outcomes differ materially. In the U.S., the expansion of the Committee on Foreign Investment in the United States’ (“CFIUS”) jurisdiction following the Foreign Investment Risk Review Modernization Act (“FIRRMA”) has widened its scope. The UK has introduced mandatory notification and standstill obligations under the National Security and Investment Act (“NSIA”), while the EU has established a framework for foreign investment screening and encouraged Member States to adopt their own. [1]