Building a Business Plan for a Challenging Geopolitical Situation – Finextra

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The war in Ukraine has disrupted global markets and the resulting economic sanctions on Russia have impacted supply chains globally. Its impact is being felt on the world’s digital infrastructure and services. The geopolitical landscape thus is increasingly becoming complex, and businesses worldwide are faced with a situation where they must constantly recalibrate business strategies in these challenging times.
Over the next two decades, competition for global influence is expected to reach its highest level since the cold war, suggests a report by the US National Intelligence Council Global Trends 2040[1]. Navigating this complex geopolitical situation thus becomes a make-or-break criterion for any enterprise regardless of sector. Business plans by themselves are often useless, this is due to the ever-changing circumstances these challenges pose. New challenges and scenarios will arise due to war, economic crises, or climate change. Staying relevant in a changing geopolitical landscape will require enterprises to rethink their planning processes.
Responding to a crisis with transformation
Leadership has a huge role in shaping an enterprise’s future. When an unforeseen event happens, the leadership must not view it as a headwind. They must instead respond and lead by looking at it as a transformation opportunity.
In this age of global disruption, both business and economic environments sometimes have to change overnight, which require new strategies and practices. C-level executives can accelerate the digitization of their internal operations, and their customer and supply chain interactions to adapt. These headwinds can prove to be an opportunity for enterprises to restructure more aggressively.
The global economic growth outlook in 2022 is projected at 3 percent and is expected to slow in 2023 to 2.8 percent[2]. About 64 percent of companies surveyed by McKinsey[3] say they will need to build new digital businesses to help them navigate these disruptions. Transformation is thus a necessity for survival and relooking at business strategies is the need of the hour.
The present Ukraine war has impacted the digital world due to higher energy costs. The top operating cost for data centers is power. To build business resilience data centers are now being diversified globally to help mitigate the rising energy costs. It also helps reduce exposure to geopolitical risks. According to a Gartner survey[4], about 41 percent of executives view geopolitical power shifts and turbulence as one of the biggest risks to performance. The survey predicts that by 2026, 70 percent of multinational enterprises will hedge to reduce their geopolitical exposure in the countries in which they currently operate.
Building a business planning process
Enterprises need to look at the geopolitical landscape from a strategic initiative viewpoint. The leadership must be able to have a conversation for a better assessment of the situation. They should not be hesitant to gain an outside perspective to avoid the risk of taking an approach that is narrow or insular. The leadership must be open to outside perspectives as part of business planning.
Disruptions and crises provide enterprises with an opportunity to relook at their retained organizations, including their captives, more comprehensively. It helps them make choices of what needs to be kept within and what can be contracted with the right partner. Reducing the number of partners also gives each more ‘skin in the game’ and hence results, in better price realization. The environment demands long-term association in projects with these partners as a means of ‘operational risk transfer’.
Foreseeing a geopolitical challenge is not possible. However, building a dynamic business planning process that enables the transformation of the organization to weather the geopolitical storms is essential.
Identifying new business risks
Changing business plans, however, also opens up new avenues of risks. The shift to remote and hybrid working has given rise to a whole host of risks in the form of cyber-frauds, and employee moonlighting that need keen understanding and appropriate mitigation plans. This will require the enterprises and their partners to be extremely synced up to avoid the ‘weakest link’ blow-up. Factoring in enterprise risk management principles into new execution plans thus becomes imperative to successful operations and delivery.
The leadership must embrace short-term actions and set up SWAT teams that can respond to crises. Such teams can help identify potential risks and help develop mitigation strategies. Enterprises are not new to this, teams that mitigate risks like building retention strategies already exist within most enterprises. Reviewing the business plans every midterm can help fix operational issues and cybersecurity strategies, brand image, services, and partnerships.
Building a business plan for a challenging geopolitical landscape requires the organization to think critically about its response and communicate effectively both within the organization and to the outside world.
 
 
 
 
 
[1]  The 7th edition of the National Intelligence Council’s Global Trends report
[2] OECD Economic Outlook 2022
[3] The new digital edge: Rethinking strategy for the postpandemic era
4. Gartner Says Geopolitical Risk Will Provide CIOs New Leadership Opportunities
 
 
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