When political disruption surrounds you, what’s your next strategic move?

Specific geostrategic actions will be needed to capitalize on the opportunities each of these political developments present while also mitigating the challenges they pose.

Five geostrategic actions to thrive in a two-tiered world

At a high level, there are five geostrategic priorities to help companies thrive amidst the geopolitical developments affecting the global operating environment in 2022.

1. Transform supply chains to match geopolitical realities

Geopolitical dynamics and the push by many governments to achieve self-sufficiency in strategic products will complicate traditional cross-border supply chains. Technology companies, manufacturers, automakers, and renewable energy companies are likely to be most affected by these policy dynamics. Complicating global supply chains further will be continued disruptions to operations and logistics driven by the pandemic, social unrest, cyberattacks and extreme weather events.

Executives should seize the opportunity to re-examine their companies’ supply chains for nearshoring, onshoring or “friendshoring” strategies to improve resilience. The introduction of supply chain due diligence regulations will likely also prompt a reassessment of suppliers and could provide both upside and downside reputational risks. Executives should therefore examine their companies’ supply chain partners and the potential risks they pose as part of a multidimensional risk assessment.

2. Make political risk central to acquisition and divestment strategies

Global M&A activity was booming for much of 2021 and the global economy is expected to grow robustly in 2022, providing strategic transactions opportunities to companies across sectors. But sectors deemed strategic will likely face limitations on or rejections of cross-border investment, while domestic M&A that creates a more competitive company on the global stage may be encouraged. Antitrust actions in a variety of markets may also weaken the likelihood of certain M&A approvals, particularly in the technology sector.

Executives should incorporate political risk assessments into their acquisition and divestment strategies to identify these dynamics at the outset. And they should use the opportunities provided by the current economic and deals environment to reassess their companies’ strategic footprint to improve resilience to current geopolitical developments.

3. Strengthen data management and digital security practices

The proliferation of regulations surrounding data security and privacy in key markets will continue to increase data sharing costs across borders. Executives need to scan the horizon for potential future shifts. And then they should align their strategies and business models according to country-specific regulations to avoid any compliance issues and gain competitive advantage.

Technology companies will likely also be at heightened risk of cyberattack, particularly software providers as they provide hackers a means of distributing malware to a large number of organizations. Executives across sectors should ensure their companies have strong cyber defences and data protection systems in place to win the trust of their customers, employees and other stakeholders.

4. Protect and grow talent pools

The so-called “Great Resignation” and continued restrictions on international labor mobility due to the pandemic means companies may need to innovate in how they attract and retain talent. For instance, sustainability and human rights diligence provides companies with the opportunity to engage and build trust among employees around these issues. At the same time, more supportive government policies in the health and education sectors could lead to improved human capital and reduced costs for companies in long run.