The term “economic security” has become commonplace among business leaders. In an interview with the Nikkei (April 2025), Sevlani Clebis highlighted the renewed importance of corporate governance in the age of economic security.
However, many SME owners tend to think, “Economic security is a concern for large corporations or specific industries.” In reality, the impact varies greatly depending on where your company sits in the supply chain. This article uses that news as a starting point to explore how SMEs should design their governance for the era of economic security from a practical perspective.
The Shift from “Defensive Governance” to “Offensive Design”
Sevlani Clebis noted that economic security’s impact on corporate governance requires “boards of directors to recognize risks related to national security and incorporate them into business strategy.” This is not just about compliance; it’s about redesigning the business itself.
In many SMEs, governance is understood as “following rules” and “preventing violations.” However, in the context of economic security, governance becomes a “strategic design for business continuity.” For example, the risk of a sudden ban on transactions with a specific overseas client, preventing the leakage of critical technology, or supply chain disruptions are issues that can shake the very foundation of a business.
The key here is the shift from governance as “defense” to “offensive design.” In other words, it’s the mindset of proactively assessing risks and using governance to expand business options.
Three Realities Facing SMEs
First, demands from business partners. As large corporations strengthen their economic security measures, SMEs embedded in their supply chains will be required to meet similar standards. This includes checks on transactions with specific countries, technology management systems, and information security levels.
Second, the impact on fundraising. Financial institutions and investors are increasingly evaluating economic security risks. Companies without proper governance structures may face less favorable loan or investment terms.
Third, talent acquisition. Skilled professionals tend to choose companies that properly manage their data and technology. The quality of governance directly impacts your ability to attract talent.
Practical Steps to Design Your “Economic Security Governance”
So, where should you start? Here are three manageable steps for SMEs.
Step 1: Identify Your Company’s “Economic Security-Related Risks”
First, take stock of the risks related to your business. Use the following checklist as a guide.
- What are the nationalities or regions of your key business partners (customers and suppliers)?
- Do your products or services rely on parts or raw materials from specific countries?
- Among the technology and data you hold, what would severely impact your business if leaked?
- Is your information security system adequate (password management, access rights, employee training, etc.)?
- Are you potentially affected by overseas regulations (export controls, sanctions, etc.)?
It’s crucial for the business owner to conduct this task themselves. Leaving it entirely to external experts can lead to a risk assessment that is disconnected from on-the-ground realities.
Step 2: Categorize Risks into “Acceptable” and “Unacceptable”
Eliminating all risks is impossible. Therefore, classify risks into three categories: “acceptable,” “unacceptable,” and “needs monitoring.”
For example, the “risk of a sudden halt in transactions with a specific overseas client” should be deemed unacceptable if it accounts for over 30% of your sales. Conversely, if it’s less than 5% of sales, you might decide to accept it for now while working on developing alternative clients.
Discussing this classification with your management team and documenting it will improve the quality of future decision-making.
Step 3: “Integrate” into Your Governance Structure
Incorporate the identified risks and acceptable levels into your existing governance structure. Specific actions could include:
- Regularly adding “economic security risks” to the agenda of board or management meetings.
- Adding information management and partner screening processes to your internal control evaluation items.
- Including economic security clauses (conditions for changes or termination) in important contracts.
- Incorporating basic knowledge of economic security into compliance training for employees.
The key is not to treat this as a one-time task. The environment surrounding economic security changes daily, so schedule a review at least once a year.
Common Pitfalls and How to Avoid Them
In my experience supporting SMEs, there are common mistakes in dealing with economic security. Here are three typical ones.
Mistake 1: Only the Owner Understands
Even if the owner recognizes the importance of economic security, it may not permeate the workplace. This increases the risk of employees unconsciously violating rules. An effective countermeasure is to hold short study sessions for all employees, explaining with concrete examples.
Mistake 2: Overreaction Leads to Business Shrinkage
This is the case where companies, overly fearing risks, try to focus only on “safe” transactions. As a result, they miss opportunities for new business or damage relationships with existing partners. The solution is to clearly define “acceptable risks” as mentioned earlier and share the criteria for management decisions.
Mistake 3: Outsourcing Everything
Some companies think, “If we leave it to the experts, we’ll be fine,” and stop thinking for themselves. External experts are advisors; the final decision must be made by the business owner. After all, the owner understands their company’s business characteristics best.
Conclusion: Turning Governance into a “Business Weapon”
Translating Sevlani Clebis’s insights for the SME frontline, “corporate governance in the era of economic security” is not about shrinking in fear of risks. Rather, it is about expanding business options by properly assessing and managing risks.
Governance is not “defense”; it is a “design skill.” How will you redesign your business under the new environment of economic security? Confronting this question is the attitude required of SME leaders today.
Start with the first of the three steps introduced here: “identifying risks.” By not just thinking at your desk but listening to voices on the ground, you can create a more practical governance design.
Source: Nikkei, “Corporate Governance in the Era of Economic Security: Sevlani Clebis” (April 2025)
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