Businesses need to adjust to a world where accelerating geopolitical shifts are becoming the new norm. Remaining agile and adaptive in a polarized world will be a precondition for success going forward.
However, while geopolitical instability forces C-suites to reorganize their business operations, the changing environment is also providing numerous opportunities.
Lockton partnered with Acuti Associates to host the 'Populism, polarisation, and the new multipolar power divide' event on 20 March 2025. In this article, we summarize the key issues that organizations must consider for conducting commerce in the ‘new era.’
A ‘new era’
From 1989 and the dissolution of the Soviet Union, the U.S. became the preeminent global hegemon as it ushered in a period of unipolarity. However, while the U.S.’ power hasn’t significantly waned, we have entered a new and multipolar world—driven by the expansion and challenge of other world powers.
C-suite executives must accept that a fundamental change has occurred in geopolitics. Economic systems and current fundamentals are not insulated from this and will also undergo drastic realignment.
What the new paradigm means for business
The existing generation of business leaders has matured in a period of relative certainty, and it may be difficult for some to adopt a new mindset that successfully weathers uncertainty. To assuage these concerns, senior leaders and decision-makers may need specific training to educate themselves on this new world order and its consequences.
Businesses should investigate the benefits of independent contractors, consultants, and non-executive directors that can provide a broader perspective and insights on differing political perspectives and regional spheres of influence.
Disruption will be an aspect of uncertainty that organizations should become accustomed to. The shock of the COVID-19 pandemic, for example, surprised many companies as they discovered how precarious and vulnerable their supply chains were. Trade frictions and military conflicts associated with the new geopolitical landscape may exacerbate existing issues and present new risks and exposures.
Reorganizing operations
A singular global approach to business and risk may need a rethink. Companies will need to consider how business models need to adapt to the demands and political realities of the various geographies their operations and customers are based in.
A granular realignment of business operations by territory requires resources that most businesses are currently not devoting. C-suite leaders need to allocate appropriate corporate headspace to efficiently strategize how they minimize their risk and seize the opportunities that present themselves.
Vying for modern resources
New geopolitical frictions are reflected in the competition for resources required to prosper in the 21st century. Cobalt, copper, and lithium are three of the most sought-after metals by nation states, and access to these raw materials is essential for many businesses—particularly those in manufacturing and tech.
Supply of copper will need to grow to satisfy rising demand—private businesses and governments are collaborating to access the large deposits that exist in central Africa, South America, and Australia. The picture is similar for lithium and cobalt. Businesses reliant on these resources must develop strategies to ensure continual access.
Competition for resources and minerals is likely to feature in future conflicts and will play a role in political posturing and negotiations. The U.S.’ proposed minerals deal in Ukraine is a key example of this.
New commerce routes
Beyond resources, commerce routes are also of vital importance. Sound risk management will consider the reliability of existing trade routes and potential diversification to limit risk, where possible.
The Belt and Road Initiative (BRI) was devised by China to reduce their dependence on the Malacca Strait, among other chokepoints, by opening alternative trade routes. In response, various nations helped set up the India-Middle East-Europe Economic Corridor (IMEC) to counter China’s growing power in the region. Businesses should habitually monitor developments within the BRI and IMEC and how they could affect their ability to trade.
Climate change is inducing a sustained increase in sea temperatures, which could accelerate the opening up of the Arctic and the Northwest Passage. Companies trading within the northeast Pacific area could look to conduct commerce via this corridor and reduce transit times and fuel costs. However, the introduction of this route could potentially hand Russia leverage over states and companies. While most of the passage is in international waters, some tighter parts pass directly through Russia’s exclusive economic zone (EEZ). Expect to see increased focus and attention from the U.S., Northern Europe, and Russia in the fight to secure this new potential trade and transit opportunity.
Operating in a de-globalizing world
Universal/global programs could become dated as nations adopt divergent regulations for various issues. For example, the Trump administration is promoting policies discouraging ESG initiatives—creating a schism with existing legislation in Europe.
Most multinationals will need defined priorities on conducting business between Europe and the U.S.. Policies surrounding diversity and climate agendas, for example, are legal requirements in Europe, but for now, they are showing significant signs of retreat and relaxation in the U.S.. Stressors such as these will require C-suites to examine how business structures operate both within local regulatory frameworks and a globally competitive marketplace. This could invoke turbulent changes as organizations must insulate themselves from legal challenges and shareholder action, depending on location.
Businesses can’t afford to sit on their hands and wait to see if a possible change of government in the U.S.in four years will trigger widespread repealment of tariffs and the wider legal/political environment. A static response may leave organizations behind the curve.
Quantifying risk
Shifts in geopolitics, artificial intelligence (AI), and climate change are all forcing businesses to adapt. However, it is imperative that risk introduced by changing business models is both acknowledged and mitigated.
The perception of risk will change significantly depending on geography, and, for some businesses, the concept of universal/global risk and mitigation strategies may now be redundant. As threats, regulatory responses, consumer habits, and political trends will vary by territory, they should be assessed in isolation within regions.
Leading in AI
The emergence of AI—and the subsequent arms race between nations and large tech giants to become the industry leader—is a key geopolitical issue. It is widely accepted that the scale of energy and resources required to dominate and expand in this space can largely only be achieved at a government scale.
A nexus between private business and government is critical for facilitating AI innovation and development. While smaller countries, such as the UK, may not have access to the cheaper energy or fiscal stimulus of larger nations, there is still a part to play for all states. While becoming the sector leader may be difficult, initiatives, such as the Cambridge hub, show the UK can still influence this industry.
Recommendations
Risks will increasingly differ by region and geography, and organizations with global operations will need to make sure that risk registers capture local and more specific risk themes. The most significant risks on a regional basis need to feed up to the corporate risk register. It is important to ensure that regional risks are assessed in a consistent way to ensure comparability.
While companies may need to remain agile to respond to risks at a regional level, it’s important that risk management activities are done within an overarching framework. This will provide assurance to the group level that risks are actively identified, consistently assessed, and effectively managed. Organizations need to regularly review risk information articulated in risk registers to ensure changes in the risk profile are captured in a timely manner.
More mature organizations should aim to strengthen their Enterprise Risk Management (ERM) framework to ensure minimum expectations around risk management are adhered to across all operating entities. This framework could follow a centralized/decentralized/hybrid structure to ensure alignment with the organization’s operating model and desired flexibility.
As the geopolitical landscape evolves, crisis management plans for specific territories need to be kept up to date. It is imperative that organizations engage with crisis specialists to ensure that crisis management plans remain relevant. Stress testing crisis management plans may be necessary due to the accelerated pace of geopolitical events—potentially requiring a quicker and more elaborate response. It may be more complicated to create a consistent global public response in a polarized world. Additionally, organizations must review single points of failure and put in place appropriate contingency plans.
It is critical that boards and risk managers educate themselves on this new reality and ensure that they are monitoring and reviewing the volatile political landscape. Those that equip themselves to deal with this new reality and an environment of uncertainty will find it easier to navigate the new multipolar reality we find ourselves in.
