Global conflict is on the rise and shows no signs of slowing down. In 2023 the world experienced the biggest increase in violent conflict since the Second World War, and the UN Security Council has consistently shown itself unable to tamp down these situations. In 2023 global defense spending reached a new high of $2.44 billion.1 Defense spending is expected to continue growing due to the unstable international environment.
The Government sector is particularly sensitive to, and affected by, these geopolitical conflicts. This article takes a closer look at the risks highlighted in KPMG’s Top risks forecast and makes recommendations as to how public sector entities and leaders can manage them.
Developed and emerging countries alike have strengthened their defense capabilities, and "geopolitically close” countries are forming alliances and attempting to step up and fill the global security leadership gap.
These are three risks we see as most likely to impact the sector today and in the years to come:
US election
All signs point to a Biden-Trump 2.0 faceoff this November, and the world is watching. Though many Americans are disillusioned by and disengaging from the candidates, the upcoming election could have many geopolitical implications.
The polarization of the US’s pre-election environment is directly impacting foreign policy and trade relations, as evidenced by the delay of aid funding to Ukraine in Congress. Regardless of the outcome, governments and multilateral institutions around the world may need to reset their trade, economic and geopolitical strategies in the run up to — and in the wake of — the US election.
Middle East crisis
Geopolitically speaking the world is in an extremely unstable place, emphasized by the ongoing crisis in the Middle East, where a period of relative stability and rapprochement abruptly ended in October 2023. Globally, an estimated one in six people have been exposed to conflict so far in 2024.2 From 2019 to 2023 there was a 22 percent increase in recorded incidents of political violence worldwide.3 The crisis has expanded beyond Israel and Gaza and is only expected to intensify as tensions continue rising.
Governments around the world are stuck in the middle. Recent protests in city centers and universities globally indicate that the public is both deeply interested and deeply divided over the conflict. Politicians are facing flack regardless of what side they support. Many of the elections being held this year will be — in some part — influenced by the crisis.
Ungoverned AI
At a time when government, society and companies are making big investments in AI, the distance between the technology and solutions being developed, and the governance structure, widens every day. This gap is furthered by the ongoing geopolitical recession, making it difficult for countries to agree on a standard, globally applicable set of AI rules.
AI presents a huge opportunity but can also be a big risk (cybersecurity concerns, disinformation, deepfakes, etc.). From a geopolitical context, there are many downsides and risks that governments must tackle — and strong, coordinated international regulations are crucial.
What Government organizations can do
To effectively navigate the geopolitical risks outlined in this article, there are proactive steps public sector organizations can take to mitigate potential challenges:
Conduct an extensive risk assessment:
Conducting a thorough assessment of your organization’s exposure to geopolitical risks can help to identify potential vulnerabilities and prioritize risks based on their potential impact. This can help you develop a targeted risk management strategy.
Closely monitor geopolitical developments:
Stay updated on geopolitical developments that may impact your organization. Monitor changes in trade policies, geopolitical tensions and emerging risks. This enables you to anticipate and respond to potential disruptions in a timely manner.
Enhance operational resilience:
Build operational resilience by implementing robust risk management practices. Develop contingency plans and scenario-based strategies to address potential disruptions. Invest in cybersecurity measures to protect your organization from cyber threats that may arise from geopolitical tensions.
Relationship management:
Organizations in the sector should place more emphasis on supplier relationship management, as monitoring suppliers and protecting critical supply chains will be a key regulatory requirement in this geopolitically complex environment.
How KPMG can help
As global leaders in professional services, KPMG firms can provide valuable assistance to Government organizations as they navigate geopolitical risks.
- Risk assessment and management: Experienced professionals can help you conduct extensive risk assessments, identify vulnerabilities, and develop tailored risk management strategies. They can provide insights into emerging risks and help you prioritize actions to mitigate potential challenges.
- Geopolitical intelligence: KPMG firms’ extensive network and research capabilities enable them to provide timely and relevant geopolitical intelligence. Their specialists can help you stay informed about geopolitical developments, assess their impact on your organization and develop proactive strategies to navigate risks.
- Supply chain optimization: KPMG professionals can help you optimize your supply chain by identifying alternative sourcing options, evaluating risks and implementing strategies to enhance resilience. Their supply chain professionals can help you diversify your supplier base and develop contingency plans to mitigate disruptions.
- Cybersecurity and data protection: With the increasing cyber threats arising from geopolitical tensions, KPMG cybersecurity professionals can help you by assessing your cybersecurity readiness, developing robust defense strategies, and providing ongoing monitoring and incident response support.
Related Content
1 Stockholm International Peace Research Institute, “Global military spending surges amid war, rising tensions and insecurity” (April 22, 2024).
2,3 Armed Conflict Location & Events Data, “ACLED Conflict Index” (January 2024).
