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Rising global uncertainty demands proactive geostrategies

August 21, 2018

Organizations have a clear choice – manage complex and unpredictable geopolitical risks or be managed by them. A knowledge-driven geostrategy can help address changing risks.

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The consensus of many observers is that the U.S. and global business outlook remains strong in the near term. However, growing geopolitical and macroeconomic uncertainties have begun to give some corporate CEOs and risk managers sleepless nights over what current trends might mean to their organizations down the road.

Tariffs, trade wars, protectionism, sanctions, rising economic populism, long-standing trade agreements under fire, and even tensions among formerly rock-solid alliances have presented corporate planners with uncertainties unlike any experienced since the global financial crisis a decade ago.

The current period of transformation and disruption makes it particularly important for corporations to have strategies in place to navigate the shoals of an increasingly turbulent, global business environment.

A recent report, “Borders vs. Barriers: Navigating uncertainty in the U.S. business environment” (a collaboration among Ernst & Young, the Atlantic Council, the Organization for International Investment, and Zurich), noted that while geopolitical trends and shock events can indeed cause major disruption, they can also create significant, new opportunities for companies that have anticipated and prepared for them. Leading organizations must engage with stakeholders and policymakers, potentially altering operations and priorities to leverage opportunities and mitigate risks, whether financial, locational, political or social.

A global survey reported in “Borders vs. Barriers” captured the views of 497 Chief Financial Officers in 30 countries. Many expressed concern about isolationist policies in the U.S. and other nations that might restrict the flow of goods, capital and people, negatively impacting continued growth and vitality in the global marketplace. Many CFOs also believe that cyber threats will continue to grow in number and severity, driven both by state and non-state actors, as well as the explosive growth and complexity of global connectivity. This view is consistent with conclusions offered in the World Economic Forum’s 2018 Global Risks Report.

A time of intensifying uncertainty and increasing global connectedness provides organizations with a clear choice – manage geopolitics or be managed by them. The first step in managing these risks is to perform a thorough assessment of the organization’s global footprint, considering all strategic goals within that context. Next, organizations must invest in knowledge and networks related to geopolitical trends, supplementing internal knowledge resources with external expertise. Finally, organizations must be prepared to act. Businesses need to be flexible and resilient, able to monitor risks proactively and constantly challenge their corporate cultures to respond to a world being transformed by shifting geopolitics.

Perhaps the most telling conclusion of “Borders vs. Barriers” is that uncertainty may be the only certainty from a geopolitical standpoint at this unique moment in time. Businesses need to realize that they have a choice in this environment to stay ahead of new and emerging risks and be prepared to seize the opportunities. Developing a proactive, flexible and knowledge-driven geostrategy can help organizations navigate uncertainty, strengthen resilience and succeed in a changing global order.