Amid heightened disruption to global norms and the world order, business leaders must seize new opportunities while mitigating emerging geopolitical risks.
After several decades marked by globalization, the world order is changing. Generative AI, climate change, governmental leadership transitions, and international conflicts and instability contribute to intensified complexity, volatility, and uncertainty, which business leaders cannot ignore. As alterations in national interests shift governments’ priorities, top CEOs around the world are assessing the geopolitical scenarios to prepare for, how to improve organizational resilience, the winning actions they can take, and how to develop the capabilities those actions will require.
During a McKinsey Live session, senior partners Cindy Levy and Shubham Singhal discussed how businesses and institutions can navigate the treacherous shoals of geopolitical disruption to not only meet the new challenges but also to benefit from the opportunities the same disruption presents.
A few advanced leadership teams are taking the steps that responding to geopolitical disruptions requires. They are focusing on value-creation opportunities that can result from developing these capabilities and strategies:
- Broadening their view of corporate strategy
- Future-proofing multinational organizations
- Building a dedicated geopolitical functional group
- Establishing a crisis-response playbook
To do so, business leaders must continually assess 10 geopolitical drivers of value, which fall into two categories:
- Trade and economics
- Trade agreements and international pacts
- Domestic industrial policies
- Domestic environmental policies and labor/immigration policies
- Import/export controls
- Tariffs and other trade barriers
- Security
- Foreign investment restrictions
- Technology, intellectual property, and cybersecurity controls
- Conflicts
- Multilateral cooperation and alliances
- Sanctions, embargos, and additions to restricted lists
To address these drivers, the best organizations are optimizing core business operations; accelerating growth, and bolstering resilience. To optimize their core, top companies are optimizing supply chains, manufacturing, and R&D across their capital-intensive operations; rebalancing the footprint of their global people operations; and diversifying the footprint of their technology infrastructure and operations. To accelerate their growth, the companies are using capital allocation, M&A, divestitures, and partnerships to optimize their business portfolios across geographies, products, and segments; and optimizing commercial acceleration to head toward rising tides and markets.
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For more on this topic, read the article “A proactive approach to navigating geopolitics as essential to thrive,” the McKinsey Quarterly article “Can your company remain global and if so, how?,” and the latest Economics conditions outlook. You can explore additional insights into geopolitics and resilience on McKinsey.com.