WIREDGOV

A generation of executives, ascendent post-Cold War, lack an institutional memory of intensifying divergence between the world’s largest economies. History offers a roadmap.

Beginning during the global pandemic, accelerating after the 2022 invasion of Ukraine and intensifying during the recent Middle East conflict, geopolitics has become a prime concern for business. According to the McKinsey Global Survey on economic conditions, business leaders have identified geopolitical instability as the primary risk to growth in every quarterly survey since March 2022 – with 59% of respondents citing it in the most recent edition, ahead of trade policy changes, inflation and domestic political conflict. These concerns have been made tangible in recent weeks, as data centres, commercial air transit hubs, office buildings, energy production facilities, ports and luxury hotels have been hit by drones and missiles. Yet this heightened awareness has not translated into institutional competence. Analysis of Western non-financial firms shows that in seven of nine major industries, multinationals now trail their domestically focused competitors on profitability – and in six of those nine, the gap has widened since the pandemic. Corporations have learned to worry about geopolitics; they have not learned how to navigate it.

The gap between recognition and capability has become especially acute for global multinationals, as firms seek to de-risk not just from US-China divergence, but increasingly from US-EU splits. The ‘Liberation Day’ tariffs of 2025, US sanctions over the EU’s Digital Services Act and Washington’s attempt to obtain Greenland have fundamentally reconfigured a commercial relationship that served as the foundational assumption of Western business strategy for decades. Corporate leadership struggles with this challenge because senior management mostly comprises individuals who built their careers during an extraordinary period when geopolitics rarely intruded upon commerce. That era has concluded, yet many firms remain institutionally unprepared because they have lost the geopolitical muscle necessary to respond.

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