We were delighted to host an illuminating keynote session with Tina Fordham, a renowned Geopolitical Strategist from Fordham Global Insight. Her presentation, "Navigating the Geopolitical Landscape and Horizon Scanning” at our offices recently sparked a wealth of insightful discussions among our clients. This session, facilitated by our partner, Tamara Box, Head of Structured Finance, provided profound insights into the complexities of the current geopolitical environment.
Geopolitical Volatility and Business Strategy
Understanding geopolitical risk:
Tina Fordham highlighted that geopolitical risk involves countries extending their influence beyond their borders. In politics, unlike in business, power typically precedes wealth. This fundamental difference often leads to a misunderstanding of geopolitical risks, largely due to a failure of imagination. Understanding that geopolitics is about power projection rather than financial gain is crucial for understanding global dynamics.
Geopolitical impact on business:
Geopolitics affects all facets of business, impacting roles from CEOs to GCs and CMOs. Fordham stressed that businesses need to view geopolitical risk as an integral part of their ecosystem, rather than an isolated risk function. The resurgence of deterrence strategies and the persistent importance of diplomacy were underscored as critical elements in navigating today's geopolitical landscape.
Volatility and opportunities:
Fordham emphasized that businesses must adopt a flexible approach to manage the volatility surrounding the current geopolitical climate. With numerous global elections on the horizon, especially the pivotal US elections, the uncertainty is likely to increase. A potential Trump victory could shift the US towards a more isolationist policy, impacting global trade and political alliances.
Current geopolitical “hot spots”:
The discussion covered various hot topics, including the ongoing conflict between Russia and Ukraine. Russia is betting that the US will avoid direct military involvement, which could drive up oil prices. Meanwhile, European countries are proactively 'Trump-proofing' their policies to mitigate potential disruptions. The situation has also bolstered unity within the European Union, illustrating how crises can sometimes lead to greater cohesion.
Broader geopolitical trends:
Since the fall of the Berlin Wall and the Financial Crisis (the quietest time on the world stage), volatility has become a constant feature of the global landscape. The increasing risks associated with climate change are expected to escalate migration issues, while declining trust levels are linked to rising crime rates and social confusion. Fordham pointed out that geopolitical trends are in a state of constant flux, requiring businesses to stay informed and adaptable.
International Disruptors:
Key international disruptors include the complex US-China relationship and the effectiveness of the UN Security Council.
The BRICS nations, while not yet serious rivals to the West, are forming stronger alliances, particularly between Russia and China. This dynamic, along with support from North Korea and Iran, signifies shifting power balances that businesses must consider.
Strategic Preparations:
To navigate these uncertainties, Fordham identified three factors that businesses should focus on:
- risk drivers,
- disruptors, and
- buffers.
Central bank liquidity remains a significant buffer, though its effectiveness is waning. Understanding and anticipating these factors can help businesses mitigate risks and capitalize on opportunities.
What does this all mean for businesses?
The insights from Tina Fordham's discussion underscore the need for businesses to integrate a geopolitical lens into their strategic planning.
Why it matters:
Risk management: Geopolitical volatility can directly impact markets, supply chains, and international operations. Recognizing and preparing for these risks can prevent disruptions and financial losses.
Strategic planning: Understanding geopolitical dynamics allows businesses to anticipate changes and adapt their strategies accordingly, ensuring long-term resilience and competitiveness.
Identifying opportunities: Amidst volatility, there are opportunities. Businesses that are agile and well-informed can leverage geopolitical shifts to their advantage, entering new markets or adjusting their offerings to meet changing demands.
Key steps for businesses:
Stay informed: Regularly monitor geopolitical developments and their potential impacts on your industry. Utilize expert analysis and insights to stay ahead of emerging risks and opportunities.
Adaptability: Build flexibility into your strategic plans. This includes diversifying supply chains, investing in risk management strategies, and being prepared to pivot quickly in response to geopolitical changes.
Engage in scenario planning: Develop and test various scenarios to understand how different geopolitical events could affect your business. Implementing such a proactive approach allows for more robust contingency planning.
Collaborate and communicate: Engage with partners, stakeholders, and experts to exchange insights and develop coordinated strategies. This includes sharing relevant geopolitical information, industry trends, and best practices to enhance collective understanding and response capabilities. Effective communication within your organization and with external partners is essential for staying informed and adaptable in the face of geopolitical risks.
Tina Fordham's insights provide a valuable framework for businesses to navigate the uncertainties of the geopolitical landscape. By integrating these considerations into strategic planning, businesses can better manage risks and seize opportunities in an increasingly complex global environment.
Client Alert 2024-134
