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Top 10 geopolitical developments for 2025

Authors

Courtney Rickert McCaffrey

EY Global Geostrategy Insights Leader; Director, Business and CXO Insights, Ernst & Young LLP
Oliver Jones

EY-Parthenon Global Client Insight and Research Leader and EY-Parthenon Global Geostrategic Business Group Leader

Contributors

Famke Krumbmüller

6 minute read 12 Dec 2024

Geopolitics is accelerating global transformation. Executives need a geostrategy to shape their future with confidence amid the disruption.

There is at least one “turning point” in almost every transformation (96%), according to joint research between EY and the University of Oxford’s Saïd Business School. How CEOs plan for and respond to these turning points can make or break the entire transformation. Crucially, almost half (48%) of turning points involve at least one major external issue or shock. Such shocks are increasingly likely to be driven by policymakers and geopolitical dynamics: In September 2024, the EY-Parthenon CEO Outlook found that more than one-third of CEOs expect geopolitical disruption and the shifting economic environment to be among the top disruptive forces in the next 12 months.

But only 30% of CEOs have full visibility into their company’s exposure to political risk across operations, markets and suppliers. This lack of visibility limits executives’ ability to set geopolitically robust strategy and shape their future with confidence. The EY-Parthenon 2025 Geostrategic Outlook can help executives gain insights into multiple, complex, interrelated geopolitical dynamics – and how they interact with other disruptive forces shaping global transformations, including technology, sustainability, demographics and macroeconomics.

The annual Geostrategic Outlook presents analysis by the EY-Parthenon Geostrategic Business Group (GBG) on the likely changes in the global political risk environment in the year ahead. The GBG is a global network of geopolitical risk professionals with years of experience in political risk, government policy, the public sector, strategy and academia.

To select the top 10 geopolitical developments in the 2025 Geostrategic Outlook, the GBG first conducted a crowdsourced horizon scanning exercise in August-September 2024 to identify potential political risks. The scanning exercise drew on inputs from multiple internal and external data and research sources. The GBG also collected inputs from dozens of individuals across EY teams around the world, including those focused on public policy, strategy, macro trends and sector-level developments. This scan encompassed the four categories of political risk in the geostrategy framework: geopolitical, country, regulatory and societal. The GBG then identified additional developments through interviews with subject matter resources in other political risk organizations.

Next, the GBG assessed all the identified political risks along two dimensions: their probability of occurring and the degree to which they would have impact on companies across sectors and geographies globally. This impact assessment is aligned with the second step in implementing a geostrategy, which is critical for understanding how geopolitics could affect transformations at global organizations. The top 10 geopolitical developments included in this Outlook are those that were assessed to be both high probability and high impact, broadly speaking, for global companies.

The 2025 Geostrategic Outlook

The past year has been characterized by political and policy uncertainty, in large part due to what we dubbed the “global elections supercycle” in the 2024 Geostrategic Outlook. Looking ahead, we identify three core themes that will characterize the nature of the top 10 geopolitical risks and reshape transformation agendas in 2025.

An interactive illustration of the top 10 geopolitical developments in the 2025 Geostrategic Outlook. Those developments are:

1. Populist policy influences

Populist influences will motivate protectionism, limit immigration and put green policies under pressure. Executives should develop communications strategies to handle sensitive political issues internally and externally as they mitigate operational and reputational risks arising from geopolitical developments.

2. Taxation conundrums

New governments will explore alternative strategies to reduce their debt burdens, including potential increases in taxes on corporates, assets and high-income households. Companies should collaborate with stakeholders to highlight the impact of potential tax changes and help governments form efficient taxation policy.

3. Demographic divides

The interplay of aging and youthful populations and immigration will increasingly shape domestic and global political dynamics. Executives should engage with policymakers to make the economic case for migration and advocate for flexible labor mobility frameworks conducive to accessing and retaining talent.

4. De-risking and dependencies

Governments will accelerate the use of economic security measures, resulting in an increasingly complex web of supplier relationships across countries and companies. Executives should prioritize transparency when diversifying to new markets to mitigate any underlying exposure to geopolitical rivals with the company’s home country.

5. Digital sovereignty

The growing strategic importance of digital technology will motivate governments to implement more policies and regulations to control their digital spaces. Executives should assess investment opportunities associated with industrial policies around artificial intelligence (AI) algorithms, semiconductors and network infrastructure.

6. Climate and competition

Climate policies will be driven by the potentially countervailing forces of three competitiveness imperatives: economic, geopolitical and price. Executives should determine how inconsistent climate regulations could affect cross-border interoperability of operations and long-term sustainability strategies.

7. New geo-energy dynamics

Government policies will continue to shift geo-energy dynamics, with uncertain implications for the speed of the global energy transition. Companies need to recognize how multiple, simultaneous energy transitions could affect strategy and compliance and consider renewable energy availability and attractiveness in investment decisions.

8. Emerging market integration

The dual push for emerging market integration and alternative multilateral institutions is creating a more complex global operating environment. Executives should explore which emerging markets provide the strongest opportunities and consider in which scenarios market entry or exit decisions should be made.

9. Wars and conflicts

As current wars continue, the escalation of tensions within and between countries and groups could spark new wars in both the physical world and in cyberspace. Executives should identify any footprint shifts or operational changes that can be made today to increase resilience to potential conflict scenarios in the future.

10. Astro-politics and the space economy

The multipolar space race will reach new heights as countries compete for technological capabilities and resource claims. Companies should build future cyber and data resilience by rethinking research and development plans and investments to foster new skill sets and develop greater operational resilience.

The top 10 geopolitical developments in the 2025 Geostrategic Outlook will have broad-based impacts on the transformation agendas of organizations across sectors and geographies. But each development is likely to have more direct impacts on certain sectors, particularly in the near to medium term. Click the tiles below to find out how leaders across industries can prepare for geopolitical disruption and shape their future with confidence.

An interactive illustration of the high-level industry implications of the top 10 developments. Those implications are:

Consumer and health

Government policies that tackle climate, demographic and digital transformations will affect companies across the consumer and health landscape. Changes in taxation could also impact corporate finances and growth prospects. Executives should evaluate how policy shifts interact with consumer preferences to inform long-term strategies.

Financial services

Geopolitical rivalries pose risks to global footprints, strategies and transformation agendas of financial service organizations. And trends toward an increasingly fragmented regulatory environment are likely to persist. Executives should confirm regulatory adherence and compliance, particularly for AI, in each geography in which they operate.

Government and infrastructure

Taxation conundrums will have a significant influence on the flow of capital to real estate and construction companies. And how to pay for strategic transformations, such as decarbonization or developing a sustainable care economy, will be a key question confronting many governments.

Industrials and energy

Governments will continue to see hydrocarbons, metals and green technologies as strategic products to target with industrial policy. Executives need to take into account how new geo-energy dynamics and climate policies are transforming market demands and business models throughout the industry.

Private equity

Much of PE’s exposure to geopolitical dynamics occurs at the portfolio company level, but demographic divides may shift fundraising processes and sources of capital while de-risking and dependencies will impact investment opportunities. Fund managers should consider these transformations when seeking to deploy capital.

Technology, media & entertainment and telecommunications

Digital sovereignty policies will impose new cross-border standards and regulations and pose new investment opportunities for companies across the industry. Executives should proactively align operations with the evolving geopolitical landscape and seek to have a voice as industry standards are defined and refined.

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Insights

Highlights

Top 10 geopolitical developments for 2025

Geopolitics is accelerating global transformation. Executives need a geostrategy to shape their future with confidence amid the disruption.

About the Geostrategic Outlook

The 2025 Geostrategic Outlook