Today’s increasingly unstable and unpredictable geopolitical landscape is impacting how we live and do business. On one hand, the world is becoming more interconnected and interdependent; on the other, it’s progressively politically fractured.

Looking at the geopolitical risks and macro trends at play today, the Ukraine-Russia conflict is particularly relevant, not only in Europe but for the world at large. It highlights the political and ideological fragmentation that we’re facing globally and has become the most significant security crisis in Europe since the 1960s. It has also led to the most severe refugee crisis in Europe since WW2 (as of 19 April 2022, over 5 million refugees have fled to neighboring countries since the start of the crisis and more than 6.5 million have been displaced internally[i]).

It’s important for business leaders to understand the political developments, economic impacts and new world order that will unfold as this crisis evolves.

International relations

With its invasion of Ukraine, Russia is challenging the post-WW2 security architecture, enshrined in the UN Charter and its prohibition of the use of force in conducting international relations[ii]. This has broken Russia’s relationships with the West for the foreseeable future, and while the crisis may not mean an end of globalization at large, Western sanctions serve to effectively end globalization for Russia. Even in the (unlikely) scenario of a ceasefire agreement and political settlement, where sanctions are lifted, it’s doubtful that NATO allies would invest in a country whose leadership is accused of committing war crimes. As the 11th largest economy in the world[iii] and a major commodity exporter, the exclusion of Russia from the global economy has global repercussions (see more on the economic impact of the crisis, below).

The key question for the broader future of globalization relates to China’s stance. For the time being, China is carefully walking a diplomatic tightrope between maintaining its close relations with Moscow, and its need to avoid unnecessary global instability. While China wants to demonstrate its ability to be a superpower, notably through providing an alternative model of global leadership to the American one, it also recognizes the importance of remaining economically integrated with the rest of the world to achieve its growth targets – at least until the focus on self-sufficiency and decoupling becomes the main imperative. So, while they are concerned about the impact of Western sanctions on global economic growth and stand to benefit greatly as Russia pulls away from the West, they have remained in broad compliance with Western sanctions and called for de-escalation and restraint. If tensions between Russia and NATO continue to ramp-up, and if China decides to take a stronger stance in support of Russian objectives, this might lead to a further decoupling between the West and China with the consequent unraveling of globalization. But we are not there yet.

Political developments

The pace of the conflict is temporarily slowing as Russia realigns its military objectives to focus on the Donbas region. As for the Western response, NATO allies have exhausted almost all possible actions, given it has said a no-fly zone is off-limits, though the EU is now seriously considering oil sanctions. The notable exception remains the targeting of Russian gas imports, but even those will likely be addressed, as Russia announced unilateral interruptions to the gas flow and EU contingency plans are secured.  This leaves Russia with the ability to ramp up its military operations in eastern Ukraine with little further consequence, and until the dust settles there, ceasefire negotiations are not likely to resume.

Looking ahead, Eurasia Group sees the following scenarios:

  • A high probability of a stalemate, with reduced conflict after some territorial gains, continued sanctions and ongoing economic impact in both countries.
  • A low and decreasing probability of a ceasefire agreement being struck (though not necessarily a political settlement, especially in light of the war crimes allegations), which includes Russian withdrawal.
  • A low but increasing probability of escalation, whereby there’s a re-expansion of Russian military objectives, an increased confrontation (and potential direct conflict) with NATO, and a ramping up of sanctions.

Economic impact

Sanctions, the curtailment of exports, supply chain disruptions (in both production and distribution), and the self-sanctioning of companies are creating unprecedented volatility in commodity prices and putting additional pressure on inflation, which was already high as countries recovered from the COVID-19 pandemic.

The impact is compounded because of the breadth of commodities coming from Ukraine and Russia. They supply 26% of global wheat, 30% of barley, 16% of corn and 80% of sunflower oil. Food price inflation will disproportionately affect emerging markets, such as Egypt and other northern African and sub-Saharan countries, that rely heavily on Russian and Ukrainian imports, thus likely increasing the risk of political instability. In addition, Ukraine is a major producer of neon, a key element in microchips and semi-conductors. Russia is the world’s largest oil producer and a top exporter of gas, as well as nickel (used in car batteries), aluminum, titanium and iron. As a result, the increased pressure on supply chains is impacting across a huge number of industries.

The economic impact of the crisis is felt more greatly within the EU (than the US, for example) because of its reliance on Ukraine and Russian commodities – and Russian energy sources, in particular. While in the short term this means more volatility, in the longer term, it means greater investments towards energy independence and a faster push towards decarbonization. The crisis might also push a very open Eurozone economy to reconsider other external market dependencies and potentially lead to more localized economic strategies.

Coupled with the increasing inflation and the deteriorating security outlook, these growing tensions will continue to play a role in national politics.

What it means for business

The crisis in Ukraine has been a watershed moment for corporate political activism. Many in the West decided to divest from Russia, even before formal sanctions entered into force. More than ever before, businesses are increasingly facing pressure (from consumers, employees, investors, etc.) to take a stance on political issues – to make values-based decisions, rather than purely economic ones, particularly as they focus on their ESG agenda. Reputational risk also becomes a factor in decision making, in addition to sanctions or regulation. For example, they may need to decide whether to maintain a presence in certain markets, which may be economically attractive, but where there are known human rights issues.

Countries are shifting away from a multilateral trade system and globally integrated economies, to a more inward self-rely and supply model, to build resilience and limit exposure to supply chain disruptions, rising inflation, etc. New local legislation is aimed at bolstering national economies by reducing reliance on globally integrated markets and foreign sources. This is creating more fragmented trade regimes and differing regulatory standards across markets, which increases the burden on companies who operate in multiple jurisdictions.

So where should you focus your Board’s attention? Here are six questions to help drive your forward-looking agenda:

  • How do we identify and monitor geopolitical risk at the Board level?
  • How can we achieve supply chain resilience and security?
  • How can we use technology for productivity gains to counter the rising price volatility and inflation?
  • How prepared are we to combat rising cyber security threats?
  • How do we navigate political minefields in a multi-polar world and develop a coherent approach based on a strong ESG agenda?
  • What are the latest dynamics in the energy transition pathway, and how will this impact us in the different jurisdictions in which we operate?


This article is based on the Board Leadership Center webinar held on 25 April 2022, including updates, as necessary, to reflect the situation at the time of writing on 4 May 2022. 

About the Board Leadership Center

KPMG’s Board Leadership Center (BLC) offers non-executive and executive board members – and those working closely with them – a place within a community of board-level peers. Through an array of insights, perspectives and events – including topical seminars and more technical Board Academy sessions – the BLC promotes continuous education around the critical issues driving board agendas.