Geopolitical risk

In an increasingly interconnected world, businesses operate across borders, tapping into global supply chains, diverse talent pools, and international markets. While globalization offers immense opportunities, it also exposes companies to a complex web of geopolitical risks. These risks—ranging from political instability to economic sanctions—can disrupt operations, impact profitability, and threaten long-term growth. Understanding and managing these risks is critical for business leaders striving to build resilience and ensure continuity.

Geopolitical risks arise from the interplay of political, economic, and social factors within and between nations. They include:

1. Political Instability: Changes in government, coups, or civil unrest can destabilize a region and affect business operations.

2. Economic Sanctions: Restrictions imposed by one country on another can limit market access, disrupt supply chains, and increase compliance costs.

3. Trade Wars: Tariffs and other trade barriers can raise costs and reduce competitiveness in international markets.

4. Regulatory Changes: Sudden shifts in laws and regulations can affect business models, particularly in sectors like finance, energy, and technology.

5. Cybersecurity Threats: State-sponsored cyberattacks targeting critical infrastructure or data can have far-reaching consequences.

6. Global Conflicts: Wars or territorial disputes can disrupt entire regions, impacting supply chains, market access, and employee safety.

Geopolitical risks can manifest in various ways, including:

• Supply Chain Disruptions: Political turmoil or sanctions can lead to shortages, delays, and increased costs.

• Market Volatility: Changes in currency values, stock markets, and commodity prices often follow geopolitical events.

• Operational Challenges: Travel restrictions, infrastructure damage, or workforce displacement can hinder operations.

• Reputational Damage: Aligning with politically controversial partners or governments can affect public perception and brand value.

During the last months geopolitic turmoil the share prices for many companies has been hampered. McKinsey has conducted a study of which companies that has been affected mostly, and not unexpectedy these are companies reliant on international trade:

What is Narrative Economics?

Narrative economics is about how stories and perceptions are spread between people and how these can change perceptions of events and economic decisions. Just think of recessions, bubbles and so on. Such stories can go viral and reinforce beliefs such as that individual shares and house prices can only go up. Regardless of whether such beliefs are right or wrong, they will be able to influence how people and companies make financial decisions. Traditionally, the subject of economics has placed little emphasis on explaining and understanding this phenomenon, but, as the video below shows, understanding narrative economics can contribute to a greater understanding of economic events that lead to recession, inequality and so on.

Dollar Street: How to live for 10 dollar a day?

Imagine that the whole world lived in the same street and where people lived was sorted by income. The poorest on the left and the richest on the right. All the others somewhere in between. Welcome to Dollar Street.

The website Dollar Street is created by the organization Gapminder. The idea is to show what standard of living people around the world have, the dependence on family income, and how this affects how they live, what they eat and what material goods they have such as toys, toothbrushes, furniture etc. The website gives a wonderful insight into what do we mean by having different living standards.