A Look into Geopolitics

The reach of geopolitical instability runs far and wide, and according to World Economic Forum’s Global Risks Report 2017, there are five factors currently weighing on the integrity of it:

The first is that collective, international cooperation is giving way to unilateral or transactional methods of handling foreign policy. This trend is on the rise just as a handful of issues such as global debt, growth, and climate change are on the rise and requiring collaborative action. The WEC fears that if these problems go unacknowledged, the brunt of their burden will fall upon fragile communities – which would create a whole new range of issues to deal with.

Secondly, the intertwined nature of our international system means that domestic level risks can become global affairs. The example discussed in the GRR17 report is the Syrian Civil War, where failures of governance led to civil conflict, which caused mass exodus out of the country to the surrounding regions. This has affected other countries, already with their own issues with growth and inequality, and it can fuel radicalization as well as violent acts.

Third is that the integrity of international relations is compromised with a declining sense of trust and good faith. The current atmosphere of heightened suspicion can exacerbate domestic tensions via accusations of outside influence on domestic issues, such as deliberate media manipulation and threat gestures from militaries.

The fourth factor is that there is a heightened risk of conflict as a new arms race is developing regarding technological innovation. Cyberspace is also a domain of conflict, which has organizations beefing up their cyber security. Meanwhile, the Arctic and deep oceans are also potential realms of conflict with remote vehicle access. Since research for these things takes place in the private sector, there’s no established system for enforcing responsible behavior.

Finally, the fifth issue is that our global institutions for governing international security is slow and reactive, while these risks are growing quickly.

Geopolitical instability can result in more than just hot or cold conflict between countries. One of the key factors is how it can affect the global market.

McKinsey & Company conducted a survey on globalization, and among the results, nearly all respondents said that they expected the global economy would experience tumult due to geopolitical volatility, and that the potential disruptions would be not only more severe, but more likely. This can hurt company profits and affect people on a more personal level if things such as lay-offs were required to combat financial issues.

84% of organizational executives, according to the survey, believe that geopolitical instability will have a significant impact on global business. It is actually ranked just as important as trends that have ranked high in previous years surveys, e.g. growth of consumers in emerging markets.

A way to address this is to have clear policy in place to address global instability. However, only 13% of respondents said that their organizations had taken active steps to deal with this. The greater focus has been on big data, consumer-empowering technology, and cyber-security.  

Ultimately, geopolitics are something to keep up with and stay informed on to prevent being taken by surprise when there are significant turns. With measures in policy taken, the impact may be somewhat alleviated.

Sources

http://www3.weforum.org/docs/GRR17_Report_web.pdf

http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/geostrategic-risks-on-the-rise

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