Global events today can feel like a series of rapid, blinding lights: intense, confusing, and obscuring the broader view. Blink, and you may miss a crucial development: second and third order effects of conflicts in the Middle East, a new development in negotiations to end the war in Ukraine, or the announcement of a new tariff or export regulation. Focus too much on breaking news, and you may lose sight of big-picture opportunities stemming from new trade corridors or proliferating trade agreements.
Yet understanding the implications of new developments matters. Business leaders today view geopolitical and trade instability as bigger threats to global growth than macroeconomic volatility, cybersecurity attacks, or technological disruption. Leading organizations are already proactively addressing geopolitical volatility, from adapting their strategies to engaging with their people to upgrading their corporate-affairs functions. Some have launched dedicated geopolitics units that gather insights about geopolitical trends, ensure strong oversight from boards and leadership teams, and cultivate foresight through scenario planning.
To mitigate risk and capitalize on the manifold opportunities geopolitical shifts can create, business leaders need to go beyond simply monitoring the news. They need to develop an ecosystem of geopolitical insights: networks of internal and external sources and capabilities that help them optimize their strategies as events unfold. A global dairy organization, for example, built several scenarios based on geopolitical trends and considered how each of its markets and manufacturing facilities would be affected by those scenarios. As a result, leaders decided to sell one business unit and use the proceeds to boost investment in another region that showed growth in most scenarios. The moves contributed to a 10 percent increase in the company’s share price the following fiscal year.
In this article, we outline the core elements of an insights ecosystem and explain how leaders can integrate the resulting findings and then act on them.
Creating an ecosystem of geopolitical insights
Most large organizations today monitor geopolitical developments, but the information that decision-makers receive tends to be fragmented, based on limited sources, and lacking clear links to business priorities. Bringing structure to that information flow can help leaders harness practical insights to guide their strategies and operating models. A robust ecosystem of geopolitical insights covers three categories: internal capabilities, advisory capabilities, and external networks.
Internal capabilities
Individuals and teams within organizations often have access to privileged information about geopolitical developments but lack clear channels to convey it to decision-makers. Leading companies use one or more of the following five mechanisms to gather, assess, and prioritize insights.
Geopolitics units. A dedicated team serves as the organization’s eye in the sky, helping business leaders identify pertinent developments amid a barrage of geopolitical news. The unit typically performs four main functions: coordinating insights from various teams; developing dashboards that track market, sector, and product exposure to key geopolitical drivers; identifying actions that the organization can pursue and that other companies are taking; and providing a strategic context for decision-makers (see sidebar, “Key features of geopolitics units”). The aim is to integrate insights from across the organization into comprehensive analyses that highlight the implications for the business. One geopolitics leader at a financial institution views the unit’s metric of success as the absence of surprises: “When a geopolitical advisory team is doing its job, it’s almost invisible—the board and the executive team are simply making better-informed decisions.”
Augmented teams. Since creating stand-alone geopolitics units can require material investment and entail sensitivities if the unit also counsels clients and partner institutions, some organizations opt to develop geopolitics capabilities within existing teams. The focus is typically on functions that operate on the front lines of geopolitical developments, such as government relations or risk management. Last year, for example, a global bank and a pension fund integrated members of their dedicated geopolitics units into other internal teams and are relying on external firms for additional insights.
Institutes. Leading companies in financial services, manufacturing, and other sectors have established geopolitics or global-affairs institutes that conduct targeted analyses to guide the organization’s businesses, advise leaders on global trends, help them plan for various scenarios, and provide counsel on investment decisions. For example, the KKR Global Institute, chaired by retired US General and former Director of the Central Intelligence Agency David Petraeus, works with the investment firm’s macroeconomic and policy teams to identify and mitigate risks to investments, including assessing which countries or regions are attractive for long-term investment and which may require a pullback. Some institutes also provide briefings for external stakeholders, clients, and investors and help shape the organization’s stance and external narrative on geopolitical topics. The JPMorganChase Center for Geopolitics and the Goldman Sachs Global Institute both fall into this category.
Dedicated executive or board roles. Some organizations have appointed executives—often former senior government officials or board members with relevant expertise—to oversee internal geopolitical capabilities. These individuals draw on their personal experience and networks to engage with policymakers on the company’s agenda, often addressing regulatory or market access issues, and serve as corporate ambassadors in international forums. Several US financial-services firms have placed former diplomats and national-security advisers in such roles. For example, Jon Huntsman Jr., former US ambassador to Russia (and former chair of the McKinsey Geopolitics Advisory Council), now leads Mastercard’s efforts to expand commercial partnerships with governments and public sector institutions. The relationships these leaders establish can be valuable even when the individuals move on to other roles. Longtime Indian diplomat S. Jaishankar, for example, served as president of global corporate affairs for Tata Sons before becoming the country’s minister of external affairs.
Boards. Geopolitical expertise has become an important criterion in many boards’ composition. The board chair of one of the world’s largest mining companies, for example, previously served as his country’s ambassador to a key market for the company. While numerous organizations have board members with geopolitical experience, the members’ knowledge is sometimes underutilized. These directors can guide and support management decisions related to navigating geopolitical risk and serve as internal advisers to business teams. They can also play an important role in engaging stakeholders and regulators across global markets to deepen relationships and strengthen their organizations’ license to operate. The board chair of a leading global commodities player, for example, has a stakeholder map of the 150 most important individuals for the company’s operations in a given market—from heads of state to port operators—and engages with them throughout the year.
Advisory capabilities
Organizations can tap external advisers to help them understand, monitor, and mitigate geopolitical risks and identify opportunities. Advisory capabilities tend to take one of the following two forms.
Advisory councils. Such councils comprise external experts—individuals with distinguished backgrounds across government, business, the media, and the nonprofit sector—who advise management on the geopolitical landscape, value creation opportunities, and risk exposure. Effective councils feature diverse points of view, with members spanning regional and sector expertise relevant to the company, and act as sounding boards to help management stress-test decisions.
External advisers. Many companies rely on advisory firms in lieu of, or in addition to, developing internal capabilities. While some organizations establish broad relationships with individual firms, others adopt a portfolio approach to gain access to a range of domain, geographic, and political expertise. The criteria organizations use in choosing external firms include the following:
- relevance: the ability to deliver sector-specific, business-relevant intelligence with dedicated analyst support
- expertise: demonstrated understanding of the company’s and its industry’s operating realities at the individual-analyst level
- global reach: a worldwide presence with local networks and partnerships providing on-the-ground intelligence
- foresight: the ability to provide projections and scenario-planning assistance
- transparency: clear methodologies for scoring, ranking, and forecasting geopolitical risks
- operating model: cost-effective, collaborative, and timely delivery of insights
External networks
A true ecosystem seeks insights from beyond the organization and its advisers. External networks typically include industry associations, government channels, geopolitical forums, outside experts, and research institutions.
Associations. Whether constituted based on geographic or industry focus, such organizations often serve as channels for interaction with regulators and government officials, gathering insights and advocating on behalf of their members. They can also provide forums where members share experiences and seek guidance from peers, as well as help business leaders engage directly with policymakers.
Government channels. Government briefings and advisories from domestic or foreign government officials (including embassies) are important sources of insights, but the real value lies in direct engagement. Business leaders who build relationships with government representatives can gain sharper insights into evolving geopolitical dynamics and cultivate support that may help them address future employee-related issues and other challenges.
Geopolitical forums. Executives who attend major geopolitical gatherings—whether regional (such as Europe’s Munich Security Conference or Asia’s Shangri-La Dialogue) or industry specific (such as Global Grain Geneva or the Offshore Technology Conference)—can glean important signals about policy developments and the strategic context. They can also share their perspectives by serving as speakers and engaging in informal discussions with experts and policymakers (at times with assistance from event organizers). Geopolitics teams at leading companies often develop annual schedules of major forums around the world and organize attendance by relevant leaders.
Experts. Many organizations invite geopolitics experts to board or leadership meetings, with some establishing speaker series in which experts engage in off-the-record discussions with company representatives. Such sessions can foster deeper engagement on geopolitical topics among the leadership and signal to the organization the importance of geopolitical considerations in business decisions. Establishing a speaker series can also help teams position themselves as sources of geopolitical insight for the organization.
Research institutions. Research organizations can broaden and deepen business leaders’ geopolitical insight through not only analyses but also proprietary databases on topics such as defense spending. Leaders may find it particularly valuable to engage with think tanks whose research informs government policy.
While the above covers the most common sources of geopolitical insight, the list is by no means exhaustive. News outlets, podcasts, newsletters, commentaries, and other open sources can provide useful information and analysis. Additionally, clients, partners, and investors can all help business leaders deepen their understanding of geopolitical realities: “We spend a lot of time with our investors discussing the world in which we’re all trying to invest together,” says KKR’s Petraeus. Similarly, a senior executive at one of the world’s largest private equity firms regularly convenes the CEOs of the firm’s portfolio companies to gain strategic insights on geopolitics-related topics that then inform his organization’s investment strategy.
Ultimately, harnessing geopolitical insights to guide strategy rests on three imperatives: assessing the business at a granular level, identifying its vulnerabilities, and recognizing which opportunities genuinely matter. With that understanding, leaders can design the geopolitical capability mix—internal, external, or hybrid—that enables them to anticipate events, not chase them.
Integrating geopolitical insights into business decisions
Insights have limited value until they are incorporated into structured, digestible analyses that draw out their implications for the organization. The results can be applied in four primary areas: risk management, strategy, operations, and stakeholder relationships.
Risk management
Geopolitical insight can help companies establish guardrails for operations in sensitive regions or sectors. Some organizations include geopolitics within their enterprise-risk-management frameworks and ensure that the topic is included in annual risk snapshots presented to the board. Possible models include the following:
- Tiering. In this model, a company tiers its markets based on their exposure to geopolitical risk. High-tier markets are ones where business leaders must navigate sharply competing interstate interests (as in the case of the escalating strategic competition between the United States and China), making continual board and management attention important. Low-tier markets typically entail localized risks, such as staffing issues or security risks generated by political or civil unrest, and internal teams typically manage challenges as they arise.
- “Traffic light” approach. Leaders assign red, yellow, or green status to projects, partners, or areas of engagement based on the severity of geopolitical risk.
- Risk dashboards. Country risk dashboards track political and economic stability within specific jurisdictions and provide visual overviews of potential threats and opportunities around market entry, investment, or supply chains.
- Geopolitical drivers. The framework organizes insights into ten categories of geopolitical change that can influence business decisions.
Strategy
Insights become a strategic asset when they inform decisions on investments in or exits from geopolitically sensitive regions. Businesses can apply the insights to optimize their global footprints—such as evaluating whether to expand production in certain jurisdictions—and inform scenario plans to anticipate potential disruptions.
Operations
Geopolitical insights can help shape the company’s operational backbone. For example, leaders may choose to adapt their business models to account for regulatory and geopolitical dynamics through adjustments to technology stacks, legal-entity and ownership structures, or workforce configurations.
Stakeholder relationships
Some organizations use their geopolitical insights to proactively engage with clients, regulators, or government officials. Sharing information on global trade, supply chain chokepoints, or unintended consequences of policies can strengthen relationships with stakeholders and showcase business leaders’ expertise. The government affairs team at a global bank, for example, shares internally developed geopolitical analyses and scenarios with government officials to explain the context and consequences of government policies and deepen relationships with officials.
“In an information-rich world . . . a wealth of information creates a poverty of attention.” These words from Nobel laureate Herbert Simon, a pioneer in decision-making research, highlight the paradox that business leaders face today. Rapidly evolving geopolitical events and abundant information (some of it misleading) can blind executives to what matters. Organizations can’t afford to overfocus on disparate fragments of information when setting strategy. Instead, they need robust ecosystems of geopolitical insights that help them develop pathways for risk management, strategy, operations, and stakeholder engagement. Such insights are critical to the oversight that business leaders must bring to adapting their organizations’ strategies and operations to thrive amidst escalating geopolitical uncertainty.
