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| | Brought to you by Alex Panas, global leader of industries, & Axel Karlsson, global leader of functional practices and growth platforms
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| | | | Volatility and caution remain high as business leaders continue to evaluate the potential impacts of tariffs and trade controls on their organizations and on the global economy. Last week, we highlighted one move that companies can make to navigate the situation: creating a geopolitical nerve center to track developments in global trade and coordinate their responses. This week, we consider the actions that leaders can take to put their companies in a strong position for the long term, even in an evolving economic landscape. | | | | | | | | | | | | | | | |
| | | | | That’s McKinsey’s Andrew Grant, Michael Birshan, Olivia White, and Ziad Haider on the challenges of being a global company in today’s uncertain environment. The authors suggest that organizations can build resilience by conducting geopolitical-scenario planning and upgrading their boards’ capabilities around geopolitical risks. They also can pursue “structural segmentation,” or “a cluster of moves that global corporations are considering to mitigate geopolitical exposure, to enable locally informed decision-making, and to clear a pathway to safe, stable growth.” Structural segmentation can involve coordinated actions across six domains: operations, R&D, technology and data, legal entity structure, capital, and people.
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| Business leaders who may feel overwhelmed by the degree of constant global change have good reason. “This is probably the most complex international environment in 80 years,” says Council on Foreign Relations President Michael Froman. In an interview with McKinsey’s Shubham Singhal, Froman adds, “We live in a fragmented world, and it’s likely to become more fragmented.” He says that leaders should consider several key issues in this evolving environment, including their dependencies on certain markets, the impact of government protectionism on supply chains, and the interplay between national security and economic concerns. The long-held view of a strong economy as an enabler of national security is “a little bit flipped on its head,” Froman observes. “Increasingly, we’re looking to economic tools as tools of national security—for example, export controls to keep the most advanced chips out of the hands of our competitors and adversaries so that we can maintain an advantage and a lead on artificial intelligence,” he says. “That could have military and intelligence implications as well as foreign investment restraints.”
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| | | | | | | — Edited by Eric Quiñones, senior editor, New York
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