23 February 2024

For nearly two-thirds of global businesses, geopolitics is the top medium-term risk and they expect geopolitical events to impact the way they do business over the next five years. In 2022 alone, 93% of global companies reported losses due to political instability. As global firms navigate through the geopolitical fog, knowing how and what to communicate externally is crucial.

What are geopolitical events and what consequences do they have for business operations?

Most geopolitical events fall into one of the following categories:

1. Political instability and conflict: This includes risks from war, terrorism, coups, civil unrest, and wider political instability, disrupting business operations, supply chains, and markets. Such instability can also lead to the imposition of sanctions, expropriation of assets, or changes in government policies that negatively affect businesses.
2. Geopolitical tensions and trade wars: Rising tensions between countries can lead to changes in trade policies that start trade wars, sanctions and embargoes, disrupting global supply chains and affect commodity prices.
3. Cybersecurity and information warfare: In the digital age, geopolitical conflicts can also manifest in cyberspace through state-sponsored cyber-attacks, espionage, and information warfare. Attackers can target critical infrastructure and steal intellectual property, posing significant risks to companies’ security and competitive position.

These events, whether on their own or in unison, disrupt business operations and force firms to shift strategies – with a tailwind effect on their external communications.

National responses to geopolitical risks – how should business communications react?

We are seeing nations increasingly use their own policy toolkits to mitigate the risks from conflict and competition on the world stage. For example, countries are using more protectionist and autarkic measures to insulate their economies from shocks to the global economic system. This is not just responses to the immediate challenges at hand. Rather, it represents a proactive approach to safeguarding national interests and promoting the strength of domestic enterprises in the face of a systemic shifts away from globalisation.

For businesses, this evolving landscape means communicating through an economic “fog of war”. Unpredictability and the potential for rapid change necessitate a solid understanding of geopolitical dynamics, especially in key markets.

Here are four geopolitical issues and business communications strategies to tackle them:

• Diversification of supply chains

The push for semiconductor reshoring, highlighted by the CHIPS and Science Act in the US and the European Raw Materials Alliance (ERMA), illustrates the strategic pivot by both blocs to secure their supply chains. For many firms, this requires uprooting operations and moving to either a friendlier country, one close to the home market, or back to the home market itself.

Firms need to navigate the complexities of disclosing strategic moves, balancing transparency with competitive considerations.

• Strategic trade agreements

Several countries are actively pursuing diversification through agreements like the CPTPP, the EU and MERCOSUR and the ongoing US and UK trade talks. This reflects a calculated effort to broaden economic ties and reduce dependency on a single, potentially hostile, entity.

Companies should develop targeted communication campaigns to leverage these agreements, emphasising their operation in safer markets and the benefits of reduced trade barriers.

• Trade barriers and protective measures

The trade tensions between the United States and China and Carbon Border Adjustment Mechanism (CBAM) are displays of a broader strategy to protect industries and assert a geopolitical stance through economic means. These actions are the inverse of trade agreements as they decrease access to markets for firms from less favourable jurisdictions.

Decisions on how to address these barriers require careful planning to align communication with business interests and those of the wider public.

• Industrial policy

The United States’ Inflation Reduction Act and the EU’s Net-Zero Industry Act (NZIA) exemplify how nations are using policy tools to drive domestic production of critical technologies and green infrastructure. The widespread adoption of industrial policies across 84 countries, representing 90% of global GDP, highlights a global trend towards reinforcing economic sovereignty.

Businesses should communicate how they align with or benefit from these policies, emphasising their role in supporting the aims of such policies.

Navigating through the fog

What businesses require is a communications strategy that is not only reactive but also anticipatory, allowing firms to operate effectively amid uncertainty. Businesses that excel in developing such a communications strategy are better positioned to not just weather the storm but to emerge more robust, ready to lead in the new economic realities that lie ahead.

Leverage your business communications in managing geopolitical challenges in three ways:

• Be proactive: Develop a communications strategy that anticipates geopolitical shifts to ensure effectiveness amidst uncertainty.
• Engage with external stakeholders: Maintain open lines of communication with public leaders and external stakeholders to secure support during geopolitical upheavals.
• Navigate sensitivities with finesse: Craft messages with careful consideration of emotional and political sensitivities to manage your company’s reputation effectively.

These approaches to managing geopolitical risks not only ensure business continuity but will also open new avenues for growth. In 2024, those who are bold and equipped with a strategic communications framework are not just surviving; they are set to thrive.

You can get in touch with Charles and the rest of our communications team here.