The ceo as chief geopolitical officer | KPMG | GH
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The ceo as chief geopolitical officer

New world: new rules or no

In the past, high politics would play out over months and years of negotiations at the United Nations, or the G20. There were rules of engagement and competing interests to be balanced. When all else failed, the country with the upper hand could simply impose its will. For businesses caught in the middle, they had time to react and reposition - and often could insure away core business risks like civil war or political violence.   Today, politics moves at the speed of social media. Rifts are instantly public, and opinions are shifted and shaped in hours. Politically expedient labelling of other countries can fundamentally change the playing field for an entire sector virtually overnight. Even within a nation's boundaries, shock-and-awe political moves like demonetization in South Asia or a corruption purge in the Middle East can unleash a decade's worth of change in days.  

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WHY THIS MATTERS

In essence, the global economy is more exposed to political instability than at any point in recent memory. The figure below is one way to think about this. The line represents whether the impact of politics on the business environment in countries that make up most of the world's GDP is improving or worsening. Admittedly, it is a small slice of data in a particularly turbulent political time, but the variability and trajectory may not be far off the new normal for the short-to-medium term.

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