Geopolitical strategist Tina Fordham warns that after decades of relative peace that led to economic expansion, globalization and market integration, the world may be sliding back into a “geo-risk supercycle.” politics”.
Fordham, founder of the consulting firm, said: “We all came of age, both personally and professionally, in a time of great peace and stability and that influenced our outlook. our point”. Fordham’s global visionin a virtual chat hosted by Luck partnered with Diligent for their Fortune Director roundtable series.
She said the period of peace ran from the fall of the Berlin Wall in 1989 to the 2007-2008 global financial crisis. data tracks global deaths in conflicts since 1400 showed a sharp decline throughout the 1990s and early 2000s. Throughout human history, this period of prosperity was only a small blip, but the leaders of these economies and today’s company doesn’t know any different.
That is starting to change, most notably because of the Israel-Hamas and Russia-Ukraine wars.
“Geopolitics is moving up the rankings in terms of risk areas that directors are concerned about,” said Dottie Schindlinger, the Fund’s chief executive. Diligent Institute. “That said, we also know from our research that directors aren’t entirely sure exactly what to do about it.”
Last year, the Diligent Institute just finished an annual study the day before conflict broke out in the Middle East. The survey found that only 7% of directors polled said geopolitical risks would materially impact their ability to deliver on their business goals in 2024. So far this year, As the report completes its work, 13% of respondents say geopolitics is a major risk. Today, three out of four directors surveyed rate geopolitical events as “medium” or “high” risk.
“There’s some understanding that we’re not spending a lot of time on this right now, but when and if something happens, it could cause major disruption for us,” Schindlinger said.
Geopolitics can weigh on global business
But anecdotally, Schindlinger shared that when council members discuss geopolitics, they tend to focus more on national elections and the impact that potential legislation could have on their business activities.
According to Fordham, it was a geopolitical misunderstanding. Geopolitics are the cross-border actions that nations take to project power, including war, espionage, sanctions, and tariffs. “Geopolitics is about power,” she said. “Power comes first, money comes later. For most people in business it’s the opposite.”
The latest global conflicts highlight the impact that geopolitics can have on global business. Russia’s invasion of Ukraine led many Western companies, from ExxonMobil to H&M next NikeARRIVE close up shop and withdraw their investment from Russia. Some Russian banks have has started from the financial infrastructure known as Swift, a move aimed at complicating foreign trade and investment.
Those actions are unprecedented and highlight the risks that geopolitics brings, especially to supply chains. The invasion of Ukraine led to major concerns about spikes in food prices, which they did to some extent. but not as bad as some people fear.
“It’s dramatic, the integration and dependence between Russia and the rest of the world is very small compared to something similar happening with China and the United States,” Fordham said.
Markets also appear complacent about risks in the Middle East, even as escalating tensions continue to rise. “However, an unexpected manifestation of the Middle East risk is the consumer boycott and protests in the United States,” Fordham warned.
Starbucks and McDonald’s are among US-based multinational companies that have faced protests for their perceived support of Israel in the ongoing military conflict in Gaza. These protests are why boards and C-Suite leaders should rethink their standard approach to geopolitics. Typically, Fordham said, a retired general or similar global expert is brought in once a year to offer some strategic advice.
Under pressure from the social front
Get out During the war, boards were also facing pressure from their employees, consumers, and shareholders about whether to get involved in social issues. More recently, executives have taken a more silent stance on news events like the Israel-Hamas war. Most have stepped back from talking about politically charged topics like diversity and inclusion or climate change. As they highlight their work on these issues, they soften language to avoid being trapped in a culture war.
“What I observed was a deep sense of uncertainty from the C-Suite and the board about what they have to do right now in this environment,” Fordham said.
Workers, especially young workers, Calling business leaders to talk more about cultural issues of the day. But at the same time, shareholders and board members tend to focus more on their core business and growth.
“I’m talking to the board right now and saying, ‘We know there’s a lot of geopolitical risk. We want to talk about growth,” Fordham shared. “Fair enough. How do you do that without thinking about the risks? I don’t think you can.”
