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Key developments
Today’s enormously challenging geopolitical environment is having a major impact on economic conditions globally. Some major geopolitical developments are testing companies’ resilience and affecting their global footprints and future strategies, especially in areas such as cost management, investment, supply chain and talent.
The EY Geostrategic Business Group has identified the 10 most likely and most impactful geopolitical developments for 2023.¹ Some of the most important developments for boards to consider as part of their strategic planning include the war in Ukraine, the decoupling of China’s economy from the Western economy, and a move toward economic self-sufficiency by certain governments as they seek to reduce their reliance on other countries, particularly strategic rivals.
Other important developments include the hardening of technology “blocs” as countries look to gain a competitive edge over technological rivals, certain jurisdictions moving more rapidly than others on ESG issues, and the persistence of high inflation, which risks bringing political instability, social unrest and economic crises to certain markets.
The World Bank has warned that growth has slowed to such an extent that the global economy is “perilously close to falling into recession” during 2023. Whether that forecast becomes a reality will depend on how geopolitical developments play out over the next few months, but the overall business environment is likely to remain highly volatile for the foreseeable future.
Boards will play a vital role in helping companies navigate this complex and uncertain operating environment in their capacity as strategic advisors to management teams. By working with management, they can ensure that the company has a flexible and resilient business model that enables it to withstand today’s geopolitical and economic challenges and thrive into the long term.