Whether they originate from territorial disputes, ideological differences or regional power struggles, geopolitical tensions can have profound impacts on the stability and development of global nations. These effects can even reach across borders, affecting the economy of neighbouring countries. They can trigger food crises in developing nations, spark inflation and lead to a shortage of essential materials. In addition, these events can also lead to a breakdown of civility and an increased risk of violence.
As a result, businesses must rethink their markets, supply chains and talent management strategies to build resilience in the face of increasing geopolitical risks. The escalation of trade frictions with China—which nearly a third of CEOs rank as the top economic geopolitical risk to business operations—presents significant challenges. In particular, a full-scale trade war could fragment global markets and disrupt key supply chains, forcing companies to rethink their sourcing strategies or production locations.
A major military conflict resulting from a geopolitical threat may have severe repercussions in the invaded region, with mass casualties and physical damage to infrastructure. This can have a domino effect on the global economy, including disruptions to shipping routes and the impact on commodity prices.
Historically, political rivalries have played a major role in shaping international relations. The competition for territory and resources led to many of the major conflicts in the 20th century, with regional disputes escalating into global wars. The decolonization process after World War II contributed to a number of rivalries as newly independent states sought sovereignty.
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