According to recent surveys, more than 50% of business executives cite systemic or geopolitical risks as the greatest challenges facing their businesses, yet they remain the crises that companies are the least prepared to manage. In order to thrive in the current globalised system, business leaders need to enhance their awareness of the impact of geopolitics.

In 2016, McKinsey & Company surveyed 1,300 business executives. The survey included executives from the manufacturing, financial, healthcare and tech industries: 84% identified geopolitical instability such as cyberattacks, energy prices, trade wars and power politics as a business risk. Most agreed these risks negatively affected their profits, yet only 13% of surveyed executives had taken steps to address them.

The report states, “Executives are likelier than ever to believe that political instability – abroad and at home – will hurt company profits.”

Take the recent NBA scandal, for example. The National Basketball Association (NBA), based in the United States, has a global reach, yet tensions with Chinese authorities mean a market audience of 1 billion people will suddenly be wiped from their reach. The NBA has “spent years cultivating lucrative deals and loyal spectators in China, but the country's politics remain a potential flashpoint”.

Some 43% of executives who were surveyed responded that their business or company uses ad hoc internal and external analysis to map risks as they occur; only 29% of those rated this method as effective.

Technology presents businesses with challenges such as data breaches alongside opportunities such as artificial intelligence. The survey revealed that 80% of executives said cyber-risks will negatively impact business yet 68% say big data will have a positive impact on company profits. Currently, this number has only increased with the rise in digitalisation.

Source: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/geostrategic-risks-on-the-rise