Much has changed in the geopolitical and global economic environment. Companies face a deluge of risks, including the escalation of the wars in Ukraine and the Middle East; the continuing deterioration of the US–China relationship; the potential for massive political and social disruption caused by misinformation or disinformation; and the continued polarization of society.
These and other risks, including supply chain disruptions, cyber security, inflation, interest rates, market volatility, and the risk of a global recession – combined with the deterioration of international governance – will continue to drive global volatility and uncertainty.
At the same time, companies face potential disruption to business models and strategy posed by accelerating advances in digital technologies such as artificial intelligence (AI), including generative AI and blockchain.
Help management reassess the company’s processes for identifying the risks and opportunities posed by disruption – geopolitical, economic, technological/digital, social, and environmental – and the impact on the company’s long-term strategy and related capital allocation decisions.
Is there an effective process to monitor any changes in the external environment and provide early warning that adjustments to strategy might be necessary? That includes risk management, as well as business continuity and resilience. It calls for frequent updating of the company’s risk profile and more scenario planning, stress testing strategic assumptions, analyzing downside scenarios, considering the interrelationship of risks, and obtaining independent third-party perspectives.
Companies need to think about ‘events’ and how they will impact the company’s business model and strategy. However, it is also critical to understand the underlying structural shifts taking place – geopolitical, demographic, technological, economic, climate, global energy transition, societal, etc. – and the longer-term implications.
