FRESH TAKES ON BIG IDEAS

For much of the last 30 years, geopolitics has been an ancillary consideration for business leaders—taking a back seat to macroeconomic, strategic, and technological concerns.

Not anymore.

In late 2024, a McKinsey global survey of 900 executives found that they consider geopolitical tensions the single greatest risk to economic growth. Trade norms and economic policy assumptions are shifting, and a new geopolitical era seems to beckon.

Amid this turmoil, it’s important to remember that disruption can offer opportunities alongside its challenges. Turning a blind eye to disruption—or viewing it solely as a danger to be guarded against—can cause executives, and the companies they lead, to get left far behind when the dust settles. Across industries, in work conducted alongside my colleague Shubham Singhal in McKinsey’s Geopolitics Practice, we see forward thinking leaders asking how to thrive in the face of new market dynamics catalyzed by geopolitics.

When looking to create value during a time of geopolitical change, businesses can take three core actions:

Prepare for the moment. To stay ahead, businesses can build dedicated, in-house geopolitical assessment teams that provide input into high-level decision-making. These teams should not only consider what could happen but also how to react, with an eye toward value creation as much as risk mitigation. These units can run scenarios and develop playbooks that include event-based triggers. Emphasis should be placed on strategies that enable organizations to capitalize on potential policy shifts—such as new industrial incentives or trade agreements. As the saying goes, luck is when preparation meets opportunity.

“For agile organizations, global shake-ups can present opportunities to thrive.”

Identify opportunities for commercial acceleration. Businesses can seek avenues for commercial acceleration relating to several geopolitical levers.

Play offense and defense. Businesses can adopt an opportunistic mindset and aim to secure a first-mover advantage. At the same time, they can balance their aggressive initiatives with “no regrets” defensive actions to reduce exposure and reinforce supply and cost certainty. Diversifying supply chains to geographies with lower tariff volatility, securing inventory buffers to guard against short-term disruptions, locking in pricing with key suppliers, and implementing dual-sourcing and multiplant strategies are all actions that can help reduce risk. What’s important is to remember that offensive and defensive moves are not mutually exclusive and can be deployed concurrently.

—Edited by Seth Stevenson, senior editor, New York

ABOUT THIS AUTHOR

Matt Watters is a partner in McKinsey’s New Jersey office.