The geopolitical landscape is constantly shifting and with every movement, the world feels the tensions as countries balance their actions and reactions to mitigate the risks and/or take advantage of opportunities. Factors such as international crises, environmental and climate stress, economic conditions, or changing alliances, can trigger geopolitical shifts and the resulting dynamics, risk resilience, and the agility of the government to quickly adapt will be critical determinants of success or failure.
As an offshoot, realignments are happening, especially apparent in the formation of new alliances, and the strengthening of regional blocs. All these affect business and industries, and to stay on top of the game, leaders of companies need to be informed, to closely monitor these developments, and to configure their strategies to effectively navigate the disruptions. The pandemic and the global response to this crisis illustrated how alliances were reconfigured to secure access and distribution of vaccines. The Russia-Ukraine War, the US-China tension, and disasters are also re-shaping the configuration of regional blocs, or the formation of new ones.
THE IMPACT ON BUSINESSGeopolitical shifts impact the way businesses operate, and perhaps one of the biggest in magnitude can be seen in the disruption of the supply chain that paralyzed the movement of goods and products across the globe. The volatility of regulatory changes and trade tariffs caused a number of companies to reshore operations to reduce their dependence on specific regions. Investing in regulatory compliance and adapting to new rules can be costly and time-consuming.
Trade barriers and sanctions affect the ability of enterprises to do business in certain countries or in exploring partnerships and investments. Political instability carries the threat of unrest or conflict that can disrupt operations, jeopardize the safety of employees, and damage assets. Increased cybersecurity threats and politically motivated cyberattacks may target businesses and will require investments in robust measures to protect data and operations. When businesses and industries are affected, it puts the economic development of the country in a precarious position.
TURNING THE SHIFTS TO BUSINESS ADVANTAGEDifficult times require proactive and strategic approaches so that the threats can become opportunities. Ideas that come to mind include:
• The discipline of scenario planning, political risk assessment and market research. It is prudent to find out the lay of the land by conducting research and risk analysis because the investment in such an assessment will be more cost-effective in the long run as pitfalls are minimized or avoided.
• Reducing dependence by diversifying supply chains will lessen vulnerabilities to disruptions. Companies can consider dual sourcing, near shoring, or re-shoring options. The government can also encourage investment inflows by making the country attractive as a possible relocation option for companies getting out of hot spots.
• Forging alliances and partnerships with industry associations can help gain business intelligence on regional developments and strengthen the industry position on issues that can adversely affect operation, such as regulatory compliance, talent management, cybersecurity, and government relations.
• Leveraging trade agreements and investment treaties to access, avail of, and maximize preferential trade terms as well as providing dispute resolution mechanisms to protect business interests in case of conflicts.
• Securing political risk insurance or its equivalent for protection against potential losses due to geopolitical events, such as expropriation, contract breaches, or political violence.
We must never forget the lessons of past crisis. If one thinks about it, each period in our history was a reaction or adaptation to challenges of that time. Successful responses became templates on how to react when they happen again; but on the flipside, the solutions were oftentimes knee-jerk, with very little thought about what their long-term effects would be.
Unfortunately, many of those palliatives became today’s problems — and yet these are still being approached as if tomorrow will never come. It is time to change that mindset and think about solutions that will not become the headaches of the next generation. As philosopher and psychologist William James said, “The greatest use of a life is to spend it on something that will outlast it.” Preparing a better future for today’s youth will certainly qualify.
Taking a proactive and strategic approach to geopolitical shifts can go a long way in managing risks, building resilience, and finding opportunities even in the midst of challenges. In an increasingly complex global landscape, staying informed and seeking expert guidance can enable informed decisions in the face of these transitions.
The 2023 Management Association of the Philippines (MAP) International CEO Conference, which has “On a Cohesion Course: Leading in the Age of Unlimited Possibilities” as its theme, tackles the complex issues of managing geopolitical shifts, transitions, and emerging alliances; keeping business leaders updated on these developments; and arming participants with insights that can help in crafting directions. Please join us today, Sept. 12, from 8 a.m. to 5 p.m., at Shangri-La The Fort, BGC. No less than the ASEAN Secretary-General Dr. Kao Kim Hourn will set the tone for the conference, and he will be joined by a distinguished panel of speakers sharing their subject expertise. For details contact the MAP Secretariat via firstname.lastname@example.org.
Alma R. Jimenez is chair of the MAP CEO Conference Committee, vice-chair of the MAP Tourism Committee, president and CEO of Health Solutions Corp., and is a former undersecretary of the Department of Tourism.