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      Geopolitical volatility – encompassing regional conflicts, intense global competition for influence and resources;, and control of new technologies – is reshaping markets, reconfiguring trade and supply routes, and refocusing both government policy and business strategy.

      Business leaders value certainty but increasingly operate in a world where major powers project strength, conflict is widespread and fundamental transitions are taking place across energy and technology.

      The year to date has been exceptionally volatile, with the immediacy of the conflict in Iran and the closure of the Strait of Hormuz showing that geopolitical flashpoints can have a far-reaching impact across the global economy, creating tighter conditions in the operating environment for business.

      While geopolitical events can appear distant, their ripple effects can be wide ranging. The economic impacts of the conflict in Iran are likely to be felt for some time regardless of any peace deal, putting pressure on prices, increasing the cost base of businesses, and impacting the UK’s overall economic growth outlook. Consumers, many of whom are already stretched, may rein in spending further. It makes the trading landscape a tougher place.

      Euan West

      Head of UK Regions and UK & EMA Head of KPMG Private Enterprise, Head of Markets & Growth

      KPMG in the UK


      Richard Kelly
      Richard Kelly

      Senior Manager – External Affairs

      KPMG in the UK



      Geopolitical shifts

      The temptation may be to hit the pause button on growth ambitions and put key investment decisions off. But the reality is that, if you defer decisions because ‘the time isn’t right’, you may end up deferring forever. Geopolitical volatility and disruption is no longer episodic; it has become systemic.

      The geopolitical frame has changed and new lenses help us understand it. We live in a fractured, multi-polar world where major powers dominate. Old certainties and alliances are shifting, and states are locked in intense competition, racing for leadership and leverage in strategic sectors, not least AI and energy.



      Analysing the front-line impacts

      What are the implications if you’re the leader of a private enterprise? Three steps could have real value for your business.


      1. Assess geopolitical trends at Board-level. Long-held assumptions of the global order are becoming less dependable, and in a more connected world, the reach and impact of geopolitics on companies is now fundamental. Identifying and understanding global fault lines is an important starting point, before embedding horizon-scanning and building market specific strategies for an increasingly fragmented global trading environment.


      2. Identify and mitigate dependence. Every business is unique, potentially with multi-faceted exposures to the global economy. This can include concentration risks across supply chains, operationsal issues at specific global flashpoints, or reliance on strategically important critical resources or technologies. In those contexts, weighing the ‘reliability’ premium is important. Understanding the elasticity of demand for goods and services is the starting point, assessing thereafter the premium to secure supply via alternative routes.


      3. Diversify to build resilience. Trade is being shaped by faultlines and the influence of sovereign power. Diversification of products and services can embed flexibility, sharpen competitiveness and extend global reach. Uncertainty and disruption can also bring opportunity, as well as risk. Having a USP is fundamental, but its value can be enhanced by understanding local and regional demand, or by casting out across new markets and trade deals.


      Managing through uncertainty

      Don’t let geopolitics be a blocker to running your business. Our Private Enterprise Barometer found that over six in ten mid-market leaders plan to diversify their businesses, through entering new markets or launching new products and services. This is a strong lever in countering volatility because it gives you more options over what to strategically prioritise and when.

      Expect uncertainty and treat it as the new normal. Adopting that mindset can lead to opportunity. Those organisations that can leverage the upsides whilst managing risk will be the winners of tomorrow.

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