Geopolitical risk is no longer remote from day-to-day business concerns as it has historically tended to be, a new report states.
The fourth edition of GlobalData’s Geopolitics Executive Briefing advises that companies in all sectors should now be paying constant attention to geopolitics. It explains that the starting point for this contention is “the chronic, intensifying and still-early-stage superpower rivalry between the US and China, in which economic weapons (sanctions, export controls, tariffs) are the instrument of first recourse.”
The rise of China challenging the status of the US as the world’s sole superpower underpins the first of six reasons given for companies to pay constant attention to geopolitics – that there is now “nowhere to hide” from its effects.
GlobalData explains: “The adversarial zero-sum dynamic of the US-China rivalry, which increasingly dominates global affairs, must be considered in many political and business decisions to manage risk and grasp opportunities, notably in relation to non-aligned countries like India.”
The other reasons given are that there is “no end in sight” due to the US-China rivalry being in its early stages, there are “powerful economic spillovers” through a backdrop of hyper-globalisation and hyper-digitalisation, the use of business and finance now as “economic weapons”, perceived evidence that the issues at stake allow no room for compromise and the potential for “contagion and polycrisis” whereby geopolitical tensions and other global crises feed off each other to become self-perpetuating.
The report notes that the re-election of Donald Trump as US President resulted in a series of shocks, such as the implementation of tariffs upending the postwar global trading system and the related intensification of the US-China struggle in tech and critical minerals.
However, it adds: “The most serious threats to trade, supply chains and investment materialise when geopolitical tensions erupt into actual and potential armed conflicts, which have proliferated this year from the chronic and bloody battles in Ukraine and Gaza to new, albeit brief, wars in Iran, South Asia and South-East Asia.”
“The business risks stemming from all these recent and continuing wars would pale beside any possible conflicts in East Asia – around Taiwan first and foremost, but with explosive potential also on the Korean peninsula and in the South China Sea.
“Some sectors – notably tech and energy (including green energy) – are exceptionally ‘geopoliticised’, making them liable to be weaponised. Geopolitical tensions have become entangled in other global challenges – namely, the climate crisis and increasing migration – with strong feedback loops.”
