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In brief
Uncertainty is our bet for word of the year. In the second quarter of 2025, the World Uncertainty Index spiked 430% from the same period the previous year. Corporate and investor attention has similarly skyrocketed, with an EY analysis of earnings calls finding that mentions of uncertainty increased by 26% in the first half of the year compared to the first half of 2024.
There are multiple disruptive forces driving this uncertainty, including technological innovation, demographic shifts and climate change. But arguably the most significant driver of uncertainty right now is geopolitics. We are living in a NAVI world — where all of these trends are increasingly non-linear, accelerated, volatile and interconnected. Put together, this creates a highly uncertain outlook for the future of globalisation.
Leveraging scenario analysis can help CEOs make decisions despite the uncertainty in this NAVI world, allowing them to prepare for potential consequences and proactively position for continued resilience and growth. In our work with companies and other organisations, we have found geopolitical scenarios to be particularly useful in four areas: setting strategy, reconfiguring supply chains, valuing assets and improving risk management. Companies that lead on geostrategy already do this well — 66% of them proactively conduct scenario analysis to set strategy and 61% use scenarios for risk mitigation.
How EY-Parthenon can help
The Geostrategic Business Group can help translate geopolitical insights into business strategy to help manage political risk. Find out how.
Read moreThe first step in scenario analysis is identifying key uncertainties. In answering the question — what is the outlook for the future of globalisation? — the team in the EY-Parthenon Geostrategic Business Group identified two key policy uncertainties that will be the primary drivers of the future global operating environment over the next five years:
Having identified foreign policies and economic sovereignty policies as today’s two key global strategic uncertainties, we identified four plausible scenarios for the future of globalisation based on the intersection of these issues.
The four scenarios are:
To help CEOs and boards assess how they may need to revise their company’s operations and strategy to adapt to whichever future arises — or, indeed, which futures arise in parallel in an asymmetric globalisation environment — we explore each scenario in more detail below.
Chapter 1
Companies would have a variety of opportunities associated with more open markets — as well as some lingering challenges — in a neo-globalism scenario.
Neo-globalism presents a partial return to the 1990s and early 2000s. Low levels of geopolitical tensions create a more stable and predictable global operating environment. New, trade-driven partnerships become more important. International problem-solving for global issues becomes more multilateral again, as emerging markets gain a greater voice in decision-making.
This scenario arises as a variety of countries — led by the EU, several Indo-Pacific countries and a broad set of emerging markets — push for deepening trade and investment ties among themselves. Market access and economic growth become the driving force in their economic policy stances, leading to an expansion in global trade flows among participating countries.
Building on the goodwill associated with trade deals, a diverse group of countries engage in the reform of international institutions, leading to a more equitable and representative form of multilateralism. Other countries, including the US, recognise the benefits of greater economic and diplomatic engagement, eventually joining these initiatives as well.
An improvement in economic conditions and a drop in geopolitical tensions enable governments to refocus spending and investment priorities on sustainable and equitable growth. Support for centrist forces rises at the expense of populism, increasing the level of domestic policy stability. Industrial policy becomes less prominent. While strategic sectors receive some policy support, markets remain broadly open to foreign firms.
Overall, in this scenario cross-border trade and investment would be strong, and so would global economic growth. Solutions to tackle climate change become an important driver of innovation and economic growth. While companies across many sectors would thrive in this scenario, a few are particularly well positioned.
Chapter 2
A regionalisation scenario would present a more complicated operating environment for international companies.
Regionalisation is somewhat reminiscent of the pre-World War I international system, in which leading powers around the world had defined spheres of influence. In this scenario, a more complex geopolitical order emerges in which countries focus on regional economic and security interests. The world is fundamentally re-engineered into a collection of regional economies that remain somewhat connected to one another.
In this scenario, the US and China effectively agree a “grand bargain” to manage their strategic competition, which begins to divide the world into spheres of influence. In its quest for strategic autonomy and in response to this international environment, Europe increasingly turns away from engagement with both the US and China. Greater cohesion is achieved within the bloc as a result. Other regional powers around the world do the same.
Regional economic institutions and new trade agreements focus on driving near-shoring and friend-shoring, encouraging production to shift to a regional orientation. Geographic proximity and strategic alignment are prioritised for both supply chain resilience and environmental sustainability. New transportation corridors, energy grids, and digital networks are built to more seamlessly connect countries within each region.
Regional powers at times use economic coercion or security pressures to assert their power over smaller neighbors. Diplomacy between regions becomes more limited and transactional. Although it is a volatile transition, the result is a relatively stable new geopolitical and security environment — albeit more complicated for companies that operate internationally.
Countries still rely on other countries around the world to supply a range of critical goods and services. Overall, though, companies in sectors that are viewed as strategically important by governments must adjust their operational models to serve a particular region. In contrast, trade in non-strategic goods such as consumer products and basic commodities continues to flow between regions, positioning some sectors to thrive in this scenario:
Chapter 3
In a Cold War II world, companies would have to navigate distinct economic blocs organised around geopolitical alliances.
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Read moreThe Cold War II scenario matches many of the characteristics of the first Cold War. Geopolitical competition and the desire for economic sovereignty would lead to the emergence of two main blocs in the global economy, each led by the US and China. There would also be a third bloc of largely non-aligned or multi-aligned countries that could be under pressure to choose a side.
This scenario would emerge from the combination of a strong transatlantic alliance and deeper relationships between China and some of its current partners, such as Russia. Multilateral institutions become increasingly irrelevant in this geopolitical environment, as economic and security institutions within each bloc are strengthened.
In capitals around the world, security rather than economic rationales drives policymaking. Governments intervene in supply chains, limit cross-border investments and impose export controls and other restrictive measures targeting the other bloc. Meanwhile, intra-bloc economic ties expand, including through new or broadened free trade agreements (FTAs) and closer energy ties.
A variety of emerging markets seek to remain relatively neutral, including through maintaining moderately open trade policies to both blocs. Yet the growing emphasis by the US, China, and their partners on strategic alignment is contributing to a more unsettled geopolitical environment. Localised proxy wars would likely occur in several regions.
The division of the global economy into blocs constrains private sector innovation and growth opportunities, effectively shrinking the size of the global operating environment to markets aligned with a company’s home government. Some sectors would benefit from government-backed investments and industrial policies, but many would face challenges across various parts of the business:
Chapter 4
A self-reliance scenario would create a variety of challenges for international companies amid an era of isolationism.
Self-reliance is similar to the 1930s. Geopolitical tensions, wars and high tariff rates fragment the global economy. Multilateral institutions lose relevance or are abandoned, so transnational challenges such as climate change, migration, and cyber threats proliferate. Globalisation has given way to a patchwork of self-contained economies focused on self-reliance and resilience over integration.
This scenario is driven by populism and nationalism gaining momentum in many countries, with voters blaming globalisation for job losses and inequality. Protecting domestic industries becomes a political imperative, as economic sovereignty and national identity emerge as rallying cries across countries.
As the rules-based international order erodes, trust collapses not only between rival blocs but also among traditional allies, such as the US and the EU. Tensions among major powers and a growing number of geopolitical flashpoints — including a variety of dormant historical disputes flaring up into active conflicts — fuel global uncertainty, disrupt supply chains, and destabilise flows of critical resources.
Governments move to secure domestic sources and build strategic stockpiles of essentials such as energy, food and rare earths. They launch sweeping industrial policy packages to secure domestic production in strategic sectors. Digital sovereignty becomes a central priority. As global standards collapse, interoperability declines, and digital borders emerge.
Economies fragment into domestically focused enclaves, with the most significant negative effects on companies’ operations and supply chains. While most sectors would be affected, some would face greater challenges in adapting their operations to this world:
Chapter 5
The future operating environment is likely to be a complex mixture of these four scenarios.
The future of globalisation could fall somewhere between these scenarios. Or globalisation could develop in more extreme ways over the next five years. For example, it could be derailed by the world veering toward a large-scale military conflict between great powers (i.e., a “hot war”). There are a variety of current tensions that make such scenarios possible. We do not assess them to be as likely as the more moderate scenarios detailed here.
Our view, however, is that picking a “most likely” scenario is answering the wrong question. Instead, we think that, based on current geopolitical dynamics, the most likely future is that all of the above may occur at the same time. Welcome to the era of asymmetric globalisation, in which different aspects of the global economy move toward each of our four scenarios simultaneously. There are three primary fault lines along which this asymmetric path for globalisation would unfold.
First, certain countries may take different pathways in the near to medium term. It is possible, for instance, that much of the world drives toward a Neo-globalism scenario while a small number of countries continue to turn inward and push toward a Self-reliance reality. The implications for companies would depend on their footprint across these two sets of markets. Another possibility is that some regions implement agreements and policies that create a Regionalisation scenario within their neighborhood, while other parts of the world may embrace Neo-globalism or pursue Self-reliance.
Second, companies are likely to experience different global operating environments depending on the sector in which they operate. The more a sector is viewed as strategic by the government, the more governments will seek to bolster economic sovereignty in those supply chains and production processes. Such policies will push more strategic sectors toward a Cold War II or Self-reliance scenario, while less strategic sectors may move toward a more Regionalisation or Neo-globalism operating environment. As a result, we are likely to continue to operate in an era of selective globalisation — or selective deglobalisation in some cases.
Third, different functions within a company might experience different global operating environments. On the most restrictive end of the spectrum are likely to be companies’ technology and data functions. As data becomes both a strategic asset and a point of geopolitical friction, new regulations and restrictions will likely continue to affect how companies collect, transfer and utilise information — pushing that function toward a Cold War II or Self-reliance scenario. In contrast, sales and marketing departments may continue to operate on a more global basis, along a Neo-globalism or Regionalisation trajectory. In fact, we can already see these patterns emerging. In the September 2025 EY-Parthenon CEO Outlook, 41% of CEOs said they have localised or are localising their company’s technology and data — compared to only 31% who are doing so for sales and marketing.
Chapter 6
CEOs and boards need to ask four questions to assess whether their strategy, supply chains, valuations and risk governance are fit for purpose.
The outlook for globalisation is complicated. It’s fundamentally uncertain. And it seems increasingly likely that it will be asymmetric. But that’s the reality of the situation that executives face today — so they should consider future-proofing their organisations for whatever constellation of scenarios emerge in the future.
Companies have a variety of operating models today — some of which will be better suited to some of these scenarios than others. In some cases, companies may need to transform supply chains, particularly for digital technologies, to match evolving geopolitical realities. Other companies may need to better incorporate political risk into how they value their assets and therefore shift which acquisition and divestment strategies they pursue. Some may need to update their risk management processes and their risk mitigation strategies, especially around data security. And some companies may need to change their entire operating model to position themselves for growth in this uncertain geopolitical environment.
Executives should consider prioritising and implementing the strategic actions that would build the most agility and robustness across all globalisation scenarios for all functions within their companies. There are four key questions they should ask themselves and their teams to determine where proactive realignment or new investments are needed:
Uncertainty has emerged as a key theme in 2025, with the World Uncertainty Index rising 430% in Q2 compared to the previous year. Factors such as technological innovation, demographic changes, climate change, and especially geopolitics contribute to this uncertainty. Companies can utilise scenario analysis to navigate these challenges, focusing on two main uncertainties: foreign policies and economic sovereignty. As such four potential scenarios for globalisation emerge: Neo-globalism, Regionalisation, Cold War II, and Self-reliance. Each presents unique challenges and opportunities for businesses.
