What was once an orderly world governed by globalization and geoeconomics is now one of escalating conflict, shifting power dynamics, and global instability. The United States’ intensifying rivalry with China, Russia’s annexation of Crimea and ongoing conflicts in the Middle East are just a few examples of the rising geopolitical risks.
While some of these events can affect businesses on a local scale, others can have global repercussions and threaten supply chain stability. Regardless of their location, companies need to be able to operate in volatile environments and build resilience into their operations and investment decisions.
In a world where the lines between political and economic interests blur, a proactive approach to geopolitical risk is essential for business success. With growing tensions, trade disputes, and a waning civility fraying the social fabric, this is an era of uncertainty where geopolitical risks reshape business strategy.
Geopolitical tensions are significant influences on international trade and investment, resulting in volatility in global markets and supply chains, and impacting investor confidence. For example, a conflict in the Middle East could disrupt oil supplies and shipping routes, negatively impacting energy prices and global trade flows. As a result, European countries that rely on energy imports could face economic challenges and higher country investor risk. These effects are even more pronounced in border and neighbour countries, as they can significantly influence economic indicators such as GDP growth, foreign direct investments and employment rates. In turn, these broader impacts can also impact sovereign risk.
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