Global Risk Management: geopolitical and regulatory risk in a politicised global economy

You do not need to be a fortune teller to predict that geopolitical risk and government intervention will be pivotal in the upcoming decades. Politics is striking back, in democratic and autocratic countries alike. In 2023, the use of the word geopolitics by CEOs has increased threefold in just two years.

Prominent media outlets and scholars have announced the entry of the global economy into an era of upheaval and geopolitical instability. Recent events in Israel and the US-China divide may exacerbate these challenges. Geopolitical risk has become one of the main challenges faced by governments, businesses, and households, affecting global trade, supply chains, commodity prices, and everyday lives.

At the same time, governments and transnational institutions like the European Union are becoming more interventionist, increasing regulatory risk. This is just the beginning. Technological progress will make regulation a hallmark of the next decade, as scientists, corporations, opinion leaders, and social movements press for new regulations in areas such as AI, genetic testing, digital currencies, and climate change. For the moment politicians are shy, but they will soon join the fray.

The big question is how. To navigate this new politicised global environment, companies will need to identify new dynamic strategies to deal with political risk. A successful approach to global risk management will require:

• anticipating political change by understanding the interplay between the actors involved in political processes
• driving political change by cooperating with public and social entities.