Seven geopolitical trends set to shape the global business environment
Oxford Analytica’s Mark Elsner shares his list of key geopolitical disruptors that could impact your business
Speaking at Fastmarkets’ annual European conference in Prague, the director of advisory at the research firm Oxford Analytica, Mark Elsner, set out what he termed the top flashpoints and longer-term trends that will be impacting the international environment in the coming years and the companies operating within it.
Reverse of globalization
First on the list, and something that underpins most, if not all, of the subsequent trends, is power rivalries and the reverse of globalization.
Governments will be making more decisions based on national security in contrast to the recent past, when efficiency was often the primary driver, Elsner said. One result of this may be increasing barriers to investment, he noted. In this scenario, it is important to note China’s position as the top supplier of technology and other items to more than 40 countries around the world.
In a world of rising great power rivalries and reversals in the trend of globalization, businesses will come to increasingly depend on higher inventories and the need to carry out more in-depth planning, according to Elsner.
China-Taiwan and Russia-Ukraine relations
Another looming challenge concerns risks over Taiwan. In Oxford Analytica’s view, China is not ready for a war over Taiwan in the shorter term of one to two years, but the chances for such a conflict in the later 2020s rise considerably, said Elsner. Two upcoming elections – the one in Taiwan and the next presidential contest in the US, will have an important impact on this situation later this decade, he added.
The shadow Russia’s invasion of Ukraine is also very much on the agenda, notably the risk of possible escalation in the coming months. Elsner cited possible moves by Russia to attack supply lines near NATO borders in western Ukraine, a possible change of power at the top in Russia, or China “coming off the fence” and actively siding with Russia, as just few scenarios that could result in significant changes to the conflict’s development and its impact on the broader geopolitical situation.
Rising cyber attacks are another growing threat that companies must carefully monitor, according to Elsner. He noted that financial motives continue to be the leading driver of such attacks at the moment, but added that geopolitical developments were a growing motivation on this front.
Zero carbon target
Elsner said the net zero carbon targets continue to gain traction but are falling short of what actually needs to be done in this area, so how progress towards net zero will be an important trend to watch. While wind and solar power draw many of the energy headlines these days, with the European Union and the US doubling down in these areas, Elsner said the biggest game changer, at least in the shorter term, could be nuclear power. “Transparent environmental reporting and your company’s carbon footprint will become increasingly important,” Elsner predicted.
Watch our webinar on forest carbon markets here
Another area to watch carefully is the momentum behind stakeholder capitalism, according to Elsner. There has been around 15 years of momentum behind the move to stakeholder capitalism, and it was given a further push by the covid-19 pandemic, but that is being challenged now, Elsner said, due to the increasing politicization of elements of the approach. Elsner pointed to some on the right in the US growing increasingly hostile to concepts like ESG. This could push companies to revert to older habits and again focus on the shareholder capitalism model, he said.
Changing work practices
Elsner also singled out the “changing world of work,” as a key trend causing disruption, notably the rise of remote working. According to his figures, remote working jumped from levels of around 5% in Europe and the US pre-pandemic to over 40% during the pandemic and has now settled at around 25% of the workforce. This is still a new frontier, and companies and managers will need to develop new skill sets to address some of the challenges this poses, Elsner said.
The shift to “smart” manufacturing and the changing nature of risk management are two other elements that will pose considerable challenges in the coming years, according to Elsner. Smart manufacturing can lead to some cost savings and can also counter some of the labor market tightness that has continued post-pandemic, Elsner said. Many firms are also re-thinking their risk management, in many cases integrating AI and big data to help them more actively address things like reputational risk management. This trend is only likely to increase in the future, Elsner said.