Displaying Geopolitical Resilience as a C-Suite Leader

Geopolitical resilience is a must-have for 2024

The economic soft power of globalisation seems to be at its weakest point at the moment business needs it most—or is it? Understanding and displaying geopolitical resilience has never been more important.

News recently [Nov 3, 2023] that Maersk is culling 10,000 jobs in light of a weakening shipping forecast met with typical market response. Shares tumbled 18 percent meaning the Danish shipping and logistics company lost around $5.1B in market value. It has since recovered some of that lost ground, but its toll ringed an alarm globally for other reasons, a somewhat more atypical reaction. 

That is because Maersk is a well-known bellwether for global trade. In a time of increasing geopolitical tension, the economic soft power of globalisation that Maersk directly represents seems to be at its weakest point at the very moment business needs it most—or is it? 

Section overview

Geopolitical risk: forever a balancing act 

Cutting through the noise—and reactive markets

Evaluating geopolitical resilience in the C-suite

Displaying geopolitical resilience as a C-suite leader

Closing remarks 

Geopolitical risk: forever a balancing act 

Displaying geopolitical resilience as a C-suite leader is always fraught. Assume too much risk in the decision-making and you overexpose your business; assume too little and you may squander competitive advantage or growth opportunities. The Goldilocks principle applies. 

Just how the C-suite strikes that balance as the world fragments along geopolitical lines, war zones and natural disasters fuelled by global warming, and coalesces around new axes of power such as AI, lithium, water and customer or brand loyalty, is not just why the endeavour is fraught, however. It also shows why it is, and continues to be, one of the most important skills of a leader today.

Geopolitics has moved up the agenda for CEOs and Boards, we have heard from many across the HotTopics C-suite communities. It made sense therefore for the rest of the C-suite—from CIOs eyeing technology and service distribution; CISOs carefully evaluating AI and quantum computing; or CMOs diligently updating customer and partner insights, as described in this HotTopics roundtable—to follow suit. 

Today, the best leaders should take a step further: do not just consider geopolitics in your strategic decision-making, actively build in geopolitical resilience.

Cutting through the noise—and reactive markets

Maersk’s November announcement was hardly surprising: 2023 began on a sober note. 

According to PwC’s 26th Annual Global CEO Survey released in January, 39 percent of global CEOs believed their organisation will no longer be economically viable in 10 years—unless it significantly changes course. This pattern was consistent across sectors, including technology, telecommunications, healthcare and manufacturing. 

Later, in November, Lorenzo Simonelli, CEO of Baker Hughes, the oilfield services company, said in an interview with the Financial Times that geopolitical risks are at their highest in half a century. 

Again in November, a survey by the European Central Bank showed how large corporations in Europe are relocating production across the globe more actively, proving CEOs in this region at least are making good on their promises to cut costs, pivot businesses and manage geopolitical risk.

The soap-like drama of the multi-layered joint venture between the US and China is also driving such moves—as Presidents Biden and Xi meet in San Francisco—and complicating our view of globalisation as in decline or otherwise.

According to McKinsey senior analysts in this podcast, global trade has been growing for the past ten years at about the pace of GDP. Trade between the US and China in 2023 is as significant as it has ever been.

This trade relationship is important for C-suite members in mapping risk profiles for the year ahead. Also vital are the trade patterns that invisibly criss-cross the globe. 

Asia–Pacific, China and the EU are highly dependent on other regions for much of their resource needs, such as minerals, energy or grains. Yet many developing economies are net providers to other regions of the same resources. The stories mix when considering powers like the US and China, but the bottom line is that even though these connections evolve (ebb or flow) over time, they do so slowly, perhaps by only a percentage point or two in any given year.

Perhaps Maersk’s share price tumble is more indicative of skittish investors then, rather than an imminent trade implosion; well fed in the inter-Covid boom years, the shipping industry was always expecting a course correction, not unlike the luxury goods market. It does not, however, mean the global industry is in for calmer waters. Tensions are real, economies are still supporting inflationary pressures and another black swan event like a pandemic is not out of the question.

Evaluating geopolitical resilience in the C-suite

Back to the CEO Survey from PwC. 

“CEOs who say they are exposed to geopolitical risk are taking action, with 48 percent of respondents increasing their investments in cybersecurity or data privacy and 46 percent adapting supply chains or adjusting their geographic footprint. Expanding into new markets also accounted for 46 percent of respondent actions; diversifying product offerings, 41 percent,” the report outlined.

Interestingly, when interrogating the data, cybersecurity is a particular area of emphasis for larger companies exposed to geopolitical conflict, while smaller businesses are focused more on diversifying their product and service offerings. (PwC offers a play-by-play for CEOs who want to make supply chains resilient and responsive.)

For the C-suite looking to impress their CEOs, consider the two concentration types that make companies particularly vulnerable to disruption: 

1. The goods (product, service, customer) are supplied by only a handful of countries. 
2. The goods (product, service, customer) are bought from only a handful of countries—despite a wider choice.

What type of good you deal with as a company will determine how exposed you are to vulnerabilities, and how quickly you can look to strengthen your geopolitical resilience by pivoting to more and/or different goods. Changing your grain supplier, for example, is far more simple that changing your computer chips vendor.

Multinationals are at the centre of this trade story, currently responsible for 32 percent of global value-added flows and 64 percent of exports, according to McKinsey’s geopolitical resilience team. And when it comes to knowledge-intensive goods, such as electronics or pharmaceuticals—things that tend to be least substitutable—that number rises to 82 percent.

But multinationals themselves can be categorised—with each having to adopt a slightly different approach to resilience and interdependence:

1. Makers and deliverers;
2. Fuelers; 
3. Discoverers and technologists;
4. Financiers. 

If you are thinking about how you should evolve your strategies in 2024, consider first where you sit within those four categories and then which (if either) of the two concentration vulnerabilities refer to your business model.

Displaying geopolitical resilience as a C-suite leader 

Those parameters can help shape and refine C-suite strategies amid global tension. To display geopolitical resilience, it then needs to be shared across the business. 

After understanding the world around your business, present this to decision makers in a clear yet informative manner. Detail different scenarios and be transparent about likelihood of occurrence, bias or blind spots in (your) data. Animal analogies are having a moment: do not focus too much on your black swans (unpredictable, macro-events with macro-impacts) that you miss your grey rhinos (predictable or predicted events that require action now) in the process. 

Adaptability is key.

As new information emerges, consider how these can help inform, refine and evolve company strategies. That is the key to resilience. C-suite leaders should establish structures to deliver on those changing decisions. In practice, it means making sure that, across legal, risk and communications, teams are operating as one and hand in glove with business units.

Then, consider segmentation and organisational configuration. Where do your cloud services sit? Your data? Your distinct teams? How does that fit within a wider context of ethics and geopolitical forces that both your external and internal stakeholder can read in the news?

This last point is important. 

Social media, amongst others, means the news is being brought into people’s private lives like never before. And the awareness and support of marginalised communities and groups has had the unfortunate side-effect of generating an online culture of opinions-bashing, tribalism and cancel culture; geopolitics is now personal and employees expect to have those answers answered at work.

C-suite leaders therefore need to identify, as far as possible, the facts.

Resilience requires facts—sober, hard, trusted yet readily updateable—in order to be conditioned within a company. Geopolitical resilience is that much more complex; some companies are now considering dedicated teams to support both the C-suite and Board here, as it can often become a full-time job in its own right. In truth, it should be the full-time job of the entire company.

Closing remarks 

We are living under a global paradox. Economically, we have never been more connected. Politically, we have never been more fragmented, at least in our lifetimes. It would be foolish to disregard the warnings that we have entered a new era of trade, partnerships, economy and business. It would be worse, however, to disregard the lessons learned from decades of geopolitics: data, flexibility, knowledge and pragmatism each go far; together they go furthest.