Rising geopolitical tensions in various parts of the world are affecting business in a variety of ways. Global markets, supply chains, energy costs, investment decisions, and leadership strategy are all under the spotlight.
Being based in the UK, it’s easy to sometimes feel comfortingly distant from troubles going on in ‘parts of the world that don’t affect us’. But couple Russia’s invasion of neighbouring Ukraine on the eastern outskirts of a shared continent with most of us getting first-hand reports from friends or colleagues in Dubai watching missiles flying through their skies, these conflicts now feel much closer to home.
Whether or not these territories have any direct relation with us, it’s now impossible to ignore the fact they’re going to have some impact on our lives, both personally and professionally.
From Government concern to boardroom priority
What was once the concern of government departments only, geopolitical tension has now become a vital agenda point for most boardrooms. It’s become imperative for executives to understand where and how these conflicts create knock-on effects in the day-to-day.
Many who might have previously felt immune could be in for a shock when the next energy bill arrives, or they might not appreciate or understand their clients’ and customers’ reliance on Middle East markets or product supplies, and they are the ones we are suddenly cutting back spending with you. The negative impact on the P&L, on productivity, on staffing or on any number of other elements that get your business functioning efficiently is bringing these conflicts into sharp focus.
Many might believe we’ve entered a prolonged era of geopolitical volatility and are adapting their teams accordingly. A study from last year, long before any Iranian conflict but after the most recent Gaza-Israeli trouble started, showed that more than three quarters of corporate affairs bosses ranked geopolitical risk as their top concern, up from 47% five years prior to that.
Unscientifically scraping LinkedIn roles in the UK today shows almost 1,000 referencing ‘geopolitical risk’ in the role description. While the capabilities to understand and translate global issues to make them relevant to business may not be new, the visibility and demand for them are.
And it’s not just these roles specific to geopolitical uncertainty that now become a consideration. Businesses with direct links to the Middle East, with remote offices, outposts or distribution facilities, are all now consumed with very basic questions about how safe it might be for their workforce just to show up day to day. More than 2,500 UK companies registered themselves in the UAE alone in 2024. Figures suggesting that may triple in the next ten years could well stall if there’s no definable end to the conflict.
What does that uncertainty do to business aspirations to expand themselves globally or to start sourcing partners and suppliers on the other side of the world if they can’t confidently be serviced?
It’ll become the jobs of those hired into boardroom positions to somehow decipher the smallest geopolitical shift to understand how and where that might become a hindrance to regular business practices.
When shipping lanes and market movements become business problems
Consider just one element of this conflict, the closing of the Straights of Hormuz, and the ways in which that will impact business. One of the world’s busiest shipping lanes and a popular route from east to west, not just for oil but for container ships full of consumer goods. Those with just-in-time business models have now had products stuck in transit for far longer than they would like. Rerouting those shipments will add even longer to the delays in getting products to their customers.
Analysts far better placed than ourselves can’t agree when this conflict might end. So much seems down to the whims of one man who sits at the head of the most powerful boardroom on the planet in Washington. Most businesses will tell you they can deal with, and plan for, negative news. All of them will say the worst condition is unpredictability.
Looking at more macro-level business impact, investment decisions and market movements are undoubtedly more volatile in times of conflict. The initial reaction to the first strikes was to see a rocketing of the price of oil. Brent Crude topped the fabled $100/barrel mark almost immediately as markets hit the panic button on supply predictability.
Asian markets, in particular, suffered the worst with markets fearing the East would be proverbially and physically ‘cut adrift’ by the conflict taking place in the Middle East. Businesses’ own investment strategies will naturally need to be reconsidered, with many hedging more cautiously to manage any over-exposure to one or more threatened currencies or commodities.
Building resilience into the fabric of your organisation
outcomes, but geopolitical pressure looks unlikely to recede in the near term. For businesses, the challenge is not to predict outcomes but to prepare for a range of scenarios. The most effective organisations are those that treat uncertainty as a constant and design accordingly.
This means integrating risk into their strategic planning, not just treating it as a ‘crisis manual’ to blow the dust off every now and then. It also means factoring more flexibility into operations. What are the plans B, C and D if and when suppliers – or indeed, supplies – are marooned?
Embedding this kind of resilience into leadership, and equally importantly into company culture, ensures teams from top to bottom are equipped to respond and act quickly and decisively with minimal disruption.
Ultimately, the question is not whether geopolitical events will impact business, but how prepared organisations are to respond when they do. In a world where disruption is increasingly the norm, resilience is no longer a safeguard; it could just be a huge competitive advantage.