The tests ahead are interconnected and have vast potential commercial impacts. The trajectory of the Russia-Ukraine conflict will affect Russia’s ability to trade with NATO members and the availability of cheap Russian gas to parts of the world.
A boost in state-sponsored cyberattacks will have governments and organizations worldwide on high alert for signs of international tensions, with vital infrastructure such as power grids and water supply networks being targeted.
Increased superpower tensions have a considerable impact on the global economy. Any disruption in the trade relationship between the US and China, for instance, will affect us all.
Trade wars and heightened international tensions could slow the movement toward increased international cooperation and trade flows, with S&P Global Market Intelligence data already showing a drop in exports in many economies.
Climate change, whether in the form of extreme weather events or rising sea levels, is already disrupting trade routes and damaging infrastructure. This geopolitical risk has the potential to significantly impact national security and global stability.
Sustained energy security concerns spell bad news for the global economy and increase fiscal, social and political challenges for governments.
Given that these geopolitical risks are interconnected, the strategies to tackle them should likewise be interconnected.
Meaningful progress on the climate transition, for instance, requires international cooperation, such as adherence to the Paris Agreement. The growing tensions between major powers will hinder global efforts to combat climate change.
The international cooperation needed to effectively address geopolitical risks such as cyberattacks and COVID-19 will always be challenging to achieve owing to the complex geopolitical relationships between many countries. But continued bilateral trade between clashing countries shows that partnerships are possible even when geopolitical tensions are on the rise.
We are arguably in the most economically disruptive period in decades, and collaboration is key to navigating this disruption. With geopolitics playing an increasingly important role in global business, it is critical, now more than ever, for companies to have geopolitical risk analysis firmly embedded into their strategy and governance.