In today’s tumultuous global business landscape, geopolitical risks are evolving and escalating. As tension blurs the lines between political and economic interests, investments and alliances are increasingly vulnerable to disruption—posing significant threats to businesses.
Various political, economic, and social threats—including the intensifying U.S.-China rivalry, mounting global instability, trade conflicts, rising nationalism, and waning civility fraying the social fabric—challenge all aspects of business operations, from supply chains to talent. While each issue is complex in its own right, these threats are ultimately interconnected facets of a broader issue: The world is moving away from cooperation, and disruption is becoming increasingly likely.
Now, companies must rethink how to thrive in an uncertain global marketplace. As geopolitical risks reshape business strategy, organizations will need to prioritize operational resilience, risk mitigation, and workforce agility to navigate multifaceted challenges. A proactive approach not only ensures resilience and business continuity but also sustains long-term growth and competitive advantage in the face of disruption.
Conflict- and Economy-Driven Threats Intensify Globally
Destabilizing foreign conflicts, cyber threats, trade disputes, and economic shifts are just a few of the interconnected geopolitical tensions presenting multiplying challenges for businesses. Unpacking these challenges, The Conference Board’s C-Suite Outlook 2025 report categorized top geopolitical risks in two key areas:
Conflict-Related Geopolitical Risks
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Economy-Related Geopolitical Risks
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Taking both conflict and economic factors into account, SHRM has identified the key geopolitical risks that will have the greatest impact on businesses in 2025, providing valuable insights for leaders navigating an increasingly volatile landscape.
International Rivalries Escalate
Declining cooperation between the U.S. and China is deepening global divisions, raising concerns about the stability of international partnerships and the global economy. Tensions are rising as the U.S. moves to curb China’s influence over the Panama Canal, asserting that China’s control over the critical trade route breaches a 1977 treaty signed by both nations. As this economic rivalry deepens, the race for technological dominance is also intensifying.
“At a time when the science is going in an upward trajectory, the relationship is falling in the wrong direction, and it is affecting unity and collaboration to manage risks,” said Fu Ying, China’s former vice minister of foreign affairs, last week at the Paris AI Action Summit. The release of cost-efficient AI models by Chinese startup DeepSeek sparked concern about the future dominance of leading U.S. models. For these nations, winning the artificial intelligence race boasts economic advantages, national security benefits, and a tremendous edge in global influence.
Why it matters to businesses:
These tensions fuel uncertainty over the future of international partnerships and supply chains, complicating long-term planning and global strategy. As the U.S. and China battle for global economic dominance, the potential for retaliatory policies—such as tariffs, trade restrictions, and cybersecurity crackdowns—poses a myriad of risks to businesses.
Decoupling or derisking from China—which nearly one-third (29%) of CEOs rank as a top economic geopolitical risk to business operations—could potentially fragment the global economy and supply chains. Companies may be forced to entirely rethink sourcing strategies, production locations, and investment plans. These tensions are expected to lead to sluggish economic growth, threatening profitability and broader business outcomes.
Additionally, businesses reliant on AI and advanced technology may be caught in a battle over regulatory standards and market access as AI supremacy increasingly becomes a matter of national security. As international trust erodes, concerns about censorship and cybersecurity threats grow, especially for businesses in the technology and data security sectors.
Global Political Instability
Rising global conflicts—such as expanding war in the Middle East and Europe—are accelerating economic instability and deglobalization. In addition to U.S.-China rivalry, escalating tensions are making international trade and investments riskier.
The U.S. is now taking a more isolationist stance, recently withdrawing from the global tax deal and openly criticizing NATO. Meanwhile, rising tensions between Iran and Gulf nations, along with U.S. involvement, are adding further strain to energy markets and geopolitical alliances.
Why it matters to businesses:
Political and economic volatility is reshaping business strategy, as sudden policy shifts, tax hikes, and regulatory changes disrupt operations and investment decisions. Fueled by conflict-related disruptions and a surge in protectionist policies, the cost of global business operations has reached a 10-year peak, with executives ranking geopolitical instability as a top threat to global growth.
Traditional business strategy centered on market size, cost, and efficiency has been disrupted, with geopolitics emerging as the dominant force shaping business decisions. An EY report highlights potential taxation conundrums and shifting geo-energy dynamics through 2025 as governments respond to uncertainty.
Additionally, conflicts in energy-rich regions—such as increasing Saudi-Iranian tensions, the Russia-Ukraine war, and the Venezuelan crisis—pose significant risks to global oil and gas supplies. These disputes can lead to energy shortages, operational disruptions, and price volatility. As a result, CEOs worldwide rank higher energy prices as the top economy-related geopolitical risk.
For businesses in emerging markets, foreign investment risks are even greater. To ensure long-term resilience, companies must quickly adapt, diversify, and, if necessary, exit volatile markets.
Trade Disruption
Escalating tension between nations is threatening the global trade market. While patterns of nearshoring previously dominated discussions, a new trend is emerging. A recent McKinsey report reveals that trade is increasingly less likely to occur between nations with oppositional politics and is more likely to occur between countries with close political alignments, despite geographical distance.
This trend is evident in escalating U.S.-China tensions, with both nations firing off new duties and tariffs in the first month of President Donald Trump’s second term. As the world’s largest economies and trade leaders, these tensions threaten global marketplace stability.
The breakdown of foreign relations in the Taiwan Strait remains a threat to critical supply chains and global technology production. Additionally, Trump’s reinstated tariffs on steel and aluminum have raised concerns about Ukraine’s economic recovery amid ongoing conflict as the nation faces financial strain and possible EU retaliation.
Why it matters to businesses:
These developments create uncertainty for businesses by disrupting supply chains, increasing production costs, and heightening the risk of retaliatory trade measures that could impact global markets. In response, CEOs believe intensified trade wars will be the most significant conflict-related geopolitical business risk in 2025.
If tensions continue to intensify, shifting supply chains away from China to reduce U.S. dependence may lead to new operational challenges and regulatory uncertainty for businesses. The need for reshoring may cause delays in planned expansion or a decrease in profit margins from increased production costs.
Rising Nationalism
A surge in nationalism—support for one’s nation’s interests, often at the exclusion or detriment of other nations—often means increases in protectionist trade policy and isolationist foreign policy. A World Economic Forum survey of chief economists found that 94% expected higher fragmentation of goods markets in the next three years, with 77% saying the same about labor.
Offshoring and global talent mobility also become more difficult with global conflict and isolationism. While reshoring strategies can mitigate the risks associated with overextended global networks, they can also lead to heightened trade barriers, tariffs, and protectionist policies. Nationalist policies may also disrupt global energy markets, leading to higher energy prices.
Why it matters to businesses:
Economic nationalism is reshaping global business strategy, requiring companies to realign for resilience. Shrinking global markets, reshoring efforts, and rising operational costs threaten profits, global talent access, and market opportunities. Businesses operating in regions with surging nationalism may face retaliatory trade measures, boycotts, regulatory hurdles, and localization pressures that disrupt operations.
Now, uncertainty is driving companies to rethink supply chains and reduce their dependence on foreign suppliers. The Conference Board finds that 78.3% of CEOs plan to alter their supply chains in the next three to five years, with nearly half (48.6%) citing risk reduction and a third (32.8%) aiming to cut costs.
To remain competitive, companies must balance cost efficiency and the push for domestic operations. CEOs will need to rethink market strategies, supply chains, and talent management to build resilience in an increasingly fragmented global economy.
Political Polarization Disrupts Workplaces
In a world plagued by mounting economic uncertainty and political tension, stress and anxiety are on the rise, and global civility is on the decline. Incivility has the potential to exacerbate other global threats, as it disrupts connections both within and between nations.
According to SHRM’s The State of Workplace Culture in 2024 report, civility is one of the international constants of a positive and productive business culture. Diverse, global workforces entail employees with different backgrounds, behaviors, and values. Building a culture of civility means all employees are treated fairly and respectfully, regardless of race and nationality. For businesses facing unprecedented political and economic uncertainties, investing in a respectful and inclusive workplace is a strategic imperative.
As international partnerships fray, nations are leaning toward protectionist policies, and collaboration is on the decline. As global incivility escalates with rising conflict, its impact at the business level mirrors the global marketplace.
SHRM's Q4 2024 Civility Index reveals that, in the U.S., nearly 3 in 4 respondents (74%) expect the uncivil behaviors they encounter at work to remain the same or worsen in 2025, identifying political polarization and workplace tensions as significant factors. Morale is also on the decline outside the U.S.: Less than half of workers in Japan (31%), France (43%), and South Korea (45%) rate their workplace culture as good or excellent, according to SHRM’s The State of Workplace Culture in 2024 report. This decline in civility is not merely a cultural concern—it has significant business implications.
Why it matters to businesses:
Much like geopolitical relations, growing divides and incivility undermine workplace collaboration and hinder financial success. A negative workplace culture leads to lower employee productivity and engagement and increased turnover. The costs of turnover—as well as associated hiring and recruiting costs—quickly add up and can be detrimental to an organization’s bottom line.
Globally, a positive organizational culture helps attract and retain top talent. SHRM data reveals that workers who rate their work cultures as positive are nearly four times more likely to stay with their current employer. In Brazil, only 8% of respondents in a positive workplace culture are looking for a new job—while 69% in a negative workplace culture are looking for a new opportunity.
By building a culture of civility, leaders can mitigate the risks of low morale, reduced productivity, and high turnover, ultimately safeguarding their organization’s bottom line and long-term success.
Executive Playbook: 3 Next Steps
Geopolitical events are unpredictable. But by proactively identifying risks, monitoring emerging geopolitical trends, and developing scenario-based contingency plans, business leaders can mitigate the severity of disruptions.
1. Assess Risk and Governance to Build Economic and Operational Resilience
Building operational resilience in an evolving regulatory and economic landscape requires scenario planning, supply chain diversification, and financial risk management. To withstand trade disruptions, regulatory shifts, and economic downturns, organizations should ensure contingency plans are in place to diversify risk exposure.
To hedge against risks, companies may consider diversifying regional investments and reassessing market exposure in politically uncertain areas. Currently, around 1 in 4 CEOs plan on vendor diversification to improve supply chains.
2. Leverage Innovation and Digital Transformation for Agility
When asked how they will improve their supply chain in the next few years, over one-third (34.3%) of CEOs said they plan to use digital technology and AI to improve performance tracking. The most competitive organizations will leverage AI tools to build more agile and cost-effective supply chains before global issues arise.
AI tools empower businesses to enhance forecasting, perform predictive risk analysis, and streamline supply chain tracking. By automating critical processes, AI not only reduces dependence on volatile markets, but also drives significant cost savings. Ensuring your organization is up-to-date with global data compliance regulations also helps avoid costly penalties.
3. Equip Your Organization to Withstand Cyber Threats
Global instability fosters an environment where cybercrime is increasingly prevalent, according to the U.S. Government Accountability Office. Threats targeting critical infrastructure, intellectual property, and financial systems pose a direct threat to business continuity and economic stability—so ensure your people are trained to resist these threats.
Investing in employee education and training on cybersecurity best practices is crucial. By equipping employees with the knowledge and skills to identify and resist threats, organizations can effectively minimize the risk of cyberattacks. This includes educating employees on how to detect phishing scams, create strong passwords, and securely handle sensitive data. Additionally, regularly updating software, implementing multi-factor authentication, and employing AI-driven threat detection systems help protect data integrity and bolster defenses.
Prioritizing cybersecurity investments and developing robust risk mitigation strategies will be key for safeguarding your operations and financial interests in an era of geopolitical turmoil.
Navigating Geopolitical Disruption
Geopolitical risks aren’t just external factors—they are fundamental business risks that affect profitability, operations, and long-term strategy. To proactively equip your organization to navigate disruption, it’s critical to dedicate efforts toward scenario-planning, risk management, and diversification strategies to increase resilience in an increasingly volatile global landscape.
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