Roundtable event: getting a grip on geopolitical upheaval

“In the work that you're doing, whether you're dealing with sanctions, with international business agreements, tariffs, movements of goods, people, or even just trying to find where growth will come from…you can't avoid geopolitics.”

These words of Tina Fordham, a leading expert and strategic adviser on geopolitical risk, summed up exactly the rationale behind a recent roundtable event on geopolitical risk hosted by Clyde & Co. Her keynote speech to a roomful of GCs, C-Suite executives and Board members representing a broad range of industries including insurance, energy, construction and commodities, addressed some of the key issues and concerns businesses are facing today as volatility persists around the world.

To get the audience thinking about the nature of today’s risks, their perceptions around them and how they can prepare for and mitigate them, Clyde & Co Senior Partner Carolena Gordon opened the event by asking two key questions. One: is the world a better or a worse place now than it ever has been? And two: which geopolitical issue worries people the most?

Unpicking perceptions of risk

The answers to both are of course subjective. In her speech, Fordham made the point that our perceptions on the state of the world have a lot to do with our mindsets. In many respects, the world is in a better place than ever in terms of issues like literacy rates, poverty rates, access to healthcare and clean water. Nonetheless turmoil is a normal state, and the threats are real. Even developed markets are seeing political risk emerging in a way that was unheard of not long ago. 

Fordham pointed out that people living in relatively stable, advanced economies are lucky to have limited direct experience of geopolitical upheaval. Indeed, the period between the fall of the Berlin Wall in 1989 and the financial crisis in 2008 was one of the most peaceful and prosperous in history. Fordham feels that this good fortune might partly explain why many in the developed world are feeling anxious and powerless about the global situation now, fuelled by technology and the 24/7 news cycle.

Fordham’s central point of her address was that it is critical to be aware of our own biases and misconceptions when looking at world events. Normality bias – i.e. seeing what we have experienced so far as a predicator of the future - may be short-sighted. Expecting others to think and act the way we do and making assumptions about their motivations is another common pitfall, because bad actors thrive on conflict and take advantage of dislocation. Failing to imagine and prepare for the range of possibilities that might occur could also expose organisations to getting caught out by unforeseen events. But equally, not spotting the potential opportunities that could arise could be a major miscalculation.

“You need to have your risk radar, but that's only half of the equation. The other half is a preparedness to accept a wider range of outcomes than we have been used to,” Fordham advised. “Fortune favours…the prepared mind.” With this in mind, the discussion then moved on to key geopolitical concerns and how they might play out.

Evaluating the business impact

Regime change: One of the major themes preoccupying the C-suite is the upcoming US election and what might mean not just for America, but for the rest of the world, given its implications for the conflict in the Middle East, the Russia-Ukraine war, and the situation with China and Taiwan. For Fordham, the key question is not who will win the election, but what will the world look like under any scenario after regime change in the White House? 

She believes it’s unlikely that any concessions or diplomatic agreements will be made before the new president is sworn in in 2025, and even after that, uncertainty could linger if there is no clear cut result. Unfortunately, this makes business decision-making all the more difficult. By contrast, in her view, the UK election looks refreshingly “boring”.

Military actions: With military hostilities taking place in many parts of the world, there are major implications for business investment, commercial agreements and supply chains. Businesses should be alert to the potential for conflict relapse in regions where tensions have flared in the past or where terrorism may be lurking not far from the surface. 

Since 85% of wars are waged in order to gain territory, a successful land-grab in one part of the world could spur others to follow suit, even against NATO member states. In resource-rich areas, this could have a major impact on the control of critical commodities, and an uptick in hostile activity in parts of Africa and South America is already becoming evident. 

Shifting power dynamics: Meanwhile power dynamics are also being rebalanced in other ways, such as the trend for foreign investors starting to target other Asian markets over China, e.g. India, Malaysia and Indonesia. Business leaders will want to watch carefully anything that resets global trade flows or alters the influence of certain countries on the international system.

Migration: Conflicts and climate change are also prompting large scale movements of people, fuelling anti-immigration sentiment particularly in Europe and the US. However, Fordham struck an optimistic note, suggesting that sometimes extremely weighty problems can force solutions to be found. For example, the growing burden on public services might push policy-makers into a radical, constructive rethink on how to deal with the situation. 

Seeking opportunities amid the threats

Despite the many challenges and unpredictability of these extraordinary times, there are good reasons for a positive attitude and a proactive approach. As Chris Holme, Clyde & Co Partner and UK Board Chair put it in his closing remarks, “I meet so many businesses in my line of work and all of them, while coming to us to navigate risk in some shape or form, are doing so not as a form of defence or retrenchment from the wider world - quite the opposite. They are navigating risk in pursuit of growth and opportunity…with prepared and cautious minds engaged. That bodes well for society.”

Geopolitical disruption looks set to stay, and business leaders cannot afford to be naïve about or disengaged from the situation on the world stage: being realistic and strategic should pay dividends. Whatever the future holds, there are bound to be winners and losers, and it’s vital to try to anticipate not only where threats might occur but also to find ways to turn risk into advantage. 

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