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Geopolitical conflicts continue at post cold-war highs. The year 2021 saw 355 conflicts alone – an increase of 64% over 2002. Although the number of conflicts has slowly been declining since 2014, recent developments in international relationships amongst the major powers as well as drivers such as access to natural resources, protection of technology, competition for economic welfare or struggle for security fuel continuous global tension.
For companies, these conflicts can be disruptive and can impact their ability to conduct business. Major risks can include shareholder and capital disintegration, intellectual property violation, substantial rearrangements of international supply chains, trade restrictions or the ceasing of local business operations.
This makes it all the more important to understand resilience as key to long-term mitigation of geopolitical risks for a company’s operating model. Becoming resilient is a highly strategic endeavor where success depends on good preparation as well as clear execution. In this report, our authors outline a four-step approach for geopolitical resilience with strategic preparation at the center.
Operational resilience
Resilience is the ability to prepare for and adapt to changing conditions and withstand and recover rapidly from disruptions.
Geopolitical resilience approach
Depending on the severity of the geopolitical disruption and the ease of adaption, different measures need to be defined. The following exhibit shows selective measures to deal with geopolitical risks that range from store, adapt, diversify and partner to restructuring.
Our recommendations on strategic preparation
To avoid major damages and reduce firefighting, here are our recommendations for strategic answers companies can to geopolitical risks now.
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Act before the factCosts of geopolitical problems can be major – do not trade them off for daily challenges.
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Treat geopolitics strategicallyTrue resilience can only be achieved through a sound strategic process.
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Keep your initial scope broadGeopolitical rifts impact companies at multiple levels, requiring a comprehensive assessment of exposure.
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Prioritize in timeGiven the complexity of today’s supply chain and number of risks, focus on the major risks.
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