How to stay global in a fracturing world

Geopolitical risks tend to surprise people. About one-third of executives report being surprised by political risk events or their impacts most or all of the time. Another 48% of executives were surprised about half of the time. This high share of unexpected risks is consistent with what executives told us last year.

Anticipating and preparing for such surprises is especially important as companies continue to pursue global growth strategies. An unexpected shock or disruption in one market can have ripple effects across an organization.

As EY Global Consulting Risk Markets Growth Leader Scott McCowan explains, "Geopolitical volatility is forcing a test that most risk functions haven't had to pass before: Can you prepare for systemic shocks ahead of time, or are you still scrambling to respond to events after the fact?”

The EY Risk Transformation study shows that Risk Strategists — organizations that treat risk as a growth enabler rather than a compliance function — are 48% more likely to reduce their proportion of unexpected risks. Risk Strategists are using AI to model and prepare for tail risks at scale.

“Leading companies are converting political risk into a source of competitive advantage,” according to McCowan. “Others are finding out how expensive backward-looking risk management really is.”

Scenario analysis is the main tool in Geostrategists’ toolkit for preparing for the unexpected. While 62% of Geostrategists conduct scenario analysis on a proactive basis to identify risk mitigation measures, only 33% of Observer companies do so. Similarly, 73% of Geostrategists proactively use political risk scenario planning to design and test strategy, compared to just 35% of Observers.

One risk leader at a financial services firm stresses the importance of scenario planning: “The risk division used to spend its time as a data aggregator for exposure assessments. Now there's a lot more attention on tools to quantify risk from those exposures – especially scenario design to actually simulate what an event would look like in order to have a tangible P&L for it. We are happy that we had a Strait of Hormuz scenario a year before that actually played out.”

Similarly, EY-Parthenon teams helped a C-suite stress-test responses to a custom geopolitical risk scenario. A facilitated tabletop exercise tested the leadership team’s existing response plans and identified gaps that should be addressed. Perhaps even more important, it helped to build the "muscle memory" to act under pressure. The value wasn't in predicting the exact scenario; it was pressure-testing whether the company could respond to a geopolitical surprise.

The timeliness and effectiveness of responses are key. Geostrategists respond faster and adapt better when surprises happen. While 63% of Geostrategists report improved performance in their response time to political risk events, only 47% of Observer company executives say the same.

How to expect the unexpected

• Boards, CEOs, Chief Strategy Officers: Challenge the assumptions underpinning strategy and ensure that all risks are identified. Run scenarios on a full variety of geopolitical outcomes to challenge assumptions, stress-test existing plans, find gaps and adapt ahead of time.
• Chief Financial Officers, Chief Operations Officers: Identify “no regrets” moves. Determine which financial and operational actions would help strengthen the organization across multiple scenarios and prioritize them.

Despite the high frequency of unexpected risks, the EY-Parthenon Geostrategy in Practice 2026 study shows that, of all the geostrategy actions we recommend, companies have made the most improvement in identifying and monitoring political risks.

“The dynamics have accelerated a lot and we're continuously monitoring in new and current geographies to establish protectionary measures and negotiate prices and costs,” as one European executive notes.

But executives have not seen similar progress on how to act on that intelligence. While 62% of global executives say their approach to political risk management has improved political risk identification, only 47% say it has improved escalation and decision-making related to those risks. The same pattern holds across other risk preparedness actions.

As Angelika Goliger, EY-Parthenon Africa Chief Economist, highlights, “Monitoring can be centralized. But deciding what to do in the midst of uncertainty is much harder.”

An EY analysis of Fortune Global 2000 companies’ transcripts supports these findings. It reveals that, despite identifying and monitoring a variety of political risks, companies frequently take fewer substantive responses or actions to manage them.

Some companies are acting to close that gap. For instance, the business resilience team at a consumer products company recognized that geopolitical risk was in a high-likelihood, high-impact position on the risk register, but that it was not well understood by the business. So EY-Parthenon teams helped to identify likely geopolitical risks and tangible scenarios for which the team could test overall understanding and then ultimately preparedness with stakeholders around the company.

But AI could widen this gap further in the months and years ahead. While 53% of executives find AI to be effective or very effective at monitoring political risks, fewer executives say the same about the decisions that follow. For instance, AI has effectively integrated political risk into risk management systems at only 44% of companies. The divergence seems to be driven by where judgement and decision-making are required.

As one US-based executive notes, “Given all the geopolitical developments around the world, our inboxes are flooded with different news and analysis sources. AI is massively helpful in collating news and data and information. But in terms of risk management, we haven’t incorporated AI into our models yet. We’ve tried some tests, but we have not been satisfied with the results yet.”

With or without AI, the competitive edge now lies in translating geopolitical insights into timely, appropriate action across the enterprise. This requires moving beyond awareness, to incorporate geopolitical insights into risk management, strategy and business and operating models. 

Geostrategists stand out on risk preparedness because of two key actions that they take. First, 99% of these companies define trigger-based contingency plans for political risks – which means that they establish triggers, or red lines, before a risk occurs. And they pre-identify what the operational, financial and strategic responses should be if the red line is crossed. This enables executives to prepare for risks in a more systematic and tangible way.

Second, almost all (99%) Geostrategists use tabletop simulations of specific scenarios to test responses to political risk events (compared to just 66% of Observer companies). These exercises enable executives to create playbooks for crisis responses and also to determine actions across the organization that could be taken ahead of a political risk event to lessen any potential impacts.

For instance, a consumer products executive highlights, “geopolitical crises have changed how we approach procurement and supplier contracts. We try to keep our contracts with suppliers flexible to allow us to act more agile. So, for example, we try not to engage in contracts longer than a year. We also try to make sure we shoulder the risk together with our suppliers. These structures enable us to be better able to respond to risks in a faster or more flexible way.”

As companies retain international supply chains and operations amid geopolitical disruption, such flexibility and adaptability will become increasingly important.

How to shift from risk monitoring to active preparation

• CEOs, COOs, CFOs: Embed geopolitical indicators in business reviews. Integrate relevant risk signals, triggers and response options into forecasting, capital allocation, supply chain and market reviews. 
• CROs and internal audit leaders: Pre-determine triggers, red lines and response options. Coordinating with operational and financial teams across the organization, set risk appetites, red lines and response options before a crisis hits. Ensure the surrounding decision infrastructure enables leadership to act quickly when needed. 

Eighty percent of global CEOs say their companies are increasing their AI investments this year. At the same time, the entire AI value chain – and frontier technologies more broadly – are the focus of economic security policies and geopolitical competition. The rapid development and adoption of AI systems have accelerated the strategic importance of semiconductors, data centers and network infrastructure. 

As a result, sovereign AI — defined as the ability of a government to exercise meaningful agency over critical AI capabilities, including data, infrastructure and governance in order to strengthen security and support economic competitiveness — has become an increasingly important goal of governments around the world.

Variation in sovereign AI policy tools across jurisdictions complicates organizations’ technology strategies
Selected examples of sovereign AI policy tools among G20 economies

But sovereign AI is not just about AI. It’s a dynamic that touches every sector of the economy because of the breadth of the AI supply chain, from critical minerals and semiconductors to power generation and physical infrastructure. Companies’ technology strategies therefore need to incorporate how geopolitics affects the entire AI supply chain.

Lisa Bouari, EY Regional AI Leader, Oceania, highlights, “While organizations can now map tier-two supplier risk with remarkable precision, few can do the same for the jurisdictions that underpin their AI, data and digital operations. Until they can, geo-tech strategy remains a work in progress.”

Companies across geographies and sectors increasingly wrestle with these choices as they continue to pursue global growth strategies. For instance, EY teams were asked to help a manufacturing company include political, regulatory and data localization factors as it considered how to organize its digital architecture and AI model access — the kind of choice that, a few years ago, would have been based largely on efficiency and cost.

Seventy-seven percent of executives in the 2026 EY Reimagining Industry Futures study said they were reassessing technology suppliers due to geopolitical risks, and nearly half of executives in our study (45%) said they have actually changed their company’s technology, data, AI and intellectual property systems and strategies to adapt to geopolitical risks. For Geostrategists, the share rises to 51%.

Among those who have made such changes, enhanced cross-border controls and changes to AI governance are the most common responses. While such changes increased data or technology costs for 73% of companies, 70% of executives said they also heightened regulatory compliance readiness and 66% pointed to increased vendor diversification. This diversification may help to build resilience across markets as more governments enact sovereign AI policies – and it might not.

“Organizations are actively reducing dependency on individual technology vendors while becoming more dependent on a small number of hyperscale platforms. Leaders should be careful not to confuse supplier choice with strategic resilience; the underlying dependency may actually be increasing,” according to Bouari.

This means that companies’ choices around data infrastructure and AI have become strategic and cross-cutting, with geopolitical exposure increasingly central to the viability of technology strategies. Consider the scope of challenges for chief technology officers, chief compliance officers and other business leaders around technological sovereignty: measuring exposure to foreign data laws, building jurisdiction-aware data governance, factoring extraterritorial risk into cloud and AI provider decisions, and stress-testing operations against divergent technology regimes.

“Geopolitics and AI are transforming the supply chain,” says a Europe-based transactions executive. “A few years ago, we had to undertake a significant investment program to replace equipment sourced from one country with equipment from producers in less geopolitically sensitive countries. This was a substantial investment that we were effectively forced to make as a result of government policies. Now, demand for certain inputs from AI data centers and models is creating further supply chain disruptions. Data centers are absorbing a significant share of the available market capacity, making certain equipment increasingly difficult to source, with longer lead times and higher prices.”

As companies remain global while the technology policy and regulatory environment fragments, it will become increasingly critical to incorporate geopolitics into companies’ technology and AI strategies. 

How to adopt a “geo-technology” strategy

• CTOs, CIOs and general counsels: Incorporate geopolitical and sovereignty considerations in your technology and AI strategy. It is increasingly important to assess where sovereignty measures, geopolitics and provider concentration pose the greatest risk – and where there are opportunities to diversify.
• Chief information security officers, COOs, general counsels: Reinforce security of critical data and infrastructure. Computing and telecom infrastructure is becoming a strategic imperative, with increasing pressures to localize data and align with national or allied jurisdictions.

Of course, how geopolitical assessments are incorporated into those strategic decisions also matters. At the global level, more than 90% of executives say their company conducts political risk due diligence when evaluating a potential transaction, but only 54% do this on a regular or proactive basis. Geostrategists again stand out: All of these companies include political risk diligence in their transaction decisions and almost 70% of them do so on a proactive basis, compared to 32% among Observers. And this pays off: Fewer Geostrategists report increases in capital costs and investment time horizons than do other companies which don’t conduct such due diligence.

EY-Parthenon teams’ work with clients shows the benefit of this incorporation of geopolitical analysis into investment decisions in practice. In one case, ahead of a potential cross-border transaction, corporate leadership had thought the potential transaction’s small size would preclude any national security scrutiny. But a geostrategic analysis showed that, in fact, the potential investment in a strategically sensitive value chain was likely to draw attention regardless of its size.

This points to both upside and downside political risks – as policies such as industrial subsidies, tariffs and investment restrictions can limit market access for some companies while generating growth opportunities for others.

“In response to geopolitical exposures,” one chief operations officer said, “the global team started to adjust its business forecasting profile to ‘how can we be more aggressive?’ How can we divert our investment towards countries which are more favorable, then reduce the investment in countries which are less favorable? We continue to double down on our investment into strategic areas. And that has also helped us to showcase some of the capabilities that otherwise would not have been possible had we not faced these geopolitical situations.”

This stance highlights how geopolitics is not just an operational and strategic consideration, but a financial one. “As organizations navigate an increasingly complex geopolitical environment, chief financial officers have an important role to play in evaluating trade-offs, strengthening resilience and supporting decisions about where to invest, grow and adapt,” explains Myles Corson, EY Global Financial Accounting Advisory Services, Strategy and Markets Leader.

Executives involved in capital allocation, investments and transactions decisions need to make sure their global growth strategies are attuned to geopolitical dynamics.

How to mandate political risk analysis for all investment decisions

• Chief strategy officers, corporate development leaders and CFOs: Mandate geopolitical diligence assessments. Before committing capital, insist on comprehensive geopolitical diligence – risk assessment, opportunity identification, potential scenarios – to improve investment outcomes.
• CFOs, COOs and CSCOs: Diversify investments, partnerships and dependencies across your footprint. Identify concentration risks across markets, suppliers and partners. Weigh the trade-offs between resiliency and efficiency to determine which global strategy is most appropriate for your organization – and then diversify accordingly.

As the prior four habits have highlighted, geostrategy is a whole-of-organization responsibility. Effective geostrategy is cross-functional by nature, touching everything from strategy and risk to operations, technology and finance, working only when all functions are connected. For the 91% of companies that are pursuing global growth strategies, geopolitical tensions and regulatory fragmentation are also elevating the importance of having both enterprise and local business-unit leadership coordinating on geostrategy.

A Europe-based company, for instance, worked with EY-Parthenon teams to assign specific geostrategy roles and responsibilities to different functions, ranging from enterprise risk and corporate security to the strategy team. The leadership team, together with risk management, was responsible for cross-functional coordination, resulting in clear accountability, and empowering faster, more effective action for future geopolitical crises.

We find that teams can be reluctant to take responsibility by making a geostrategic call, especially when a volatile environment can quickly prove you wrong. Ownership is about giving people the authority, support and strategic clarity to decide.

Famke Krumbmüller, EY-Parthenon EMEIA Geostrategy Leader, frames this issue: “Companies that establish clear ownership, systematically analyze scenarios, and prepare concrete response options cannot eliminate uncertainty, but they can significantly strengthen their resilience.”

Without governance that enables action, this complexity can prohibit the effective implementation of geostrategy. There is a growing recognition of this challenge: 54% of companies have a committee responsible for geostrategy, compared to only 39% that assign responsibility to an individual function or business unit. And among EY-Parthenon geostrategy clients, demand for support around geopolitical governance has risen sharply in recent years, a recognition that earlier, sometimes ad hoc, arrangements are no longer suitable.

As one COO summed up, “If you don't have solid governance to raise new issues and give you enough time to provide actions, you suffer the impact more than you already have.”

There is evidence that companies are suffering such unnecessary impacts. Governance performance improvements lag behind other aspects of geostrategy. Less than half of executives point to improvements in political risk escalation and decision-making or in accountability and ownership. This disconnect could be due to who has responsibility for geostrategy. Ownership at the C-suite level still sits mostly with legal and risk functions, not the operational and financial leaders on the front lines.

Ownership also needs to start at the top. One telecoms executive explains that an effective response relies on clear direction from the board, empowering employees to make calls when necessary, and clear pathways to escalate and resolve risks under clear evidence.

As another infrastructure company executive emphasized, “It’s very important that political risk has to be at a high level of consideration at the board. In the past, risk was not a driver or a factor that the board had to manage. Now political risk is part of strategic decisions, as well as daily operational activity.”

EY-Parthenon Geostrategy Index results support this view. Geostrategists are 1.2 times to 1.5 times more likely to have a board that engages in a variety of geopolitical risk management activities. They are also more proactive across all governance actions – with the biggest gap between Geostrategists and Observers in assigning executive ownership. 

Governance is arguably the most important aspect of geostrategy, particularly for companies that are pursuing global growth strategies. Coordinating geostrategy activities across functions, business units and geographies is critical to navigating today’s geopolitical environment.

How to get the right people around the geostrategy table

• CEOs, Boards: Align functions and executives to each element of your geostrategy. Determine which roles and functions need to be represented, ensuring coverage across all of the areas of geostrategy activity, from risk identification to strategic alignment.
• CEOs, CROs: Assign owners for material geopolitical risks. To make geopolitical monitoring and analysis actionable, assign ownership of risks to specific personnel, empower them with the authority to make decisions and clarify escalation paths.

As companies pursue global growth strategies amid heightened geopolitical tensions, it is increasingly important to view business decisions through a geostrategic lens. Executives navigating this environment need to have not only the best geopolitical intelligence, but also the capacity and willingness to turn that intelligence into operational, financial and strategic decisions. 

Becoming a Geostrategist often requires new investments in geostrategic capabilities. The improvement in EY-Parthenon Geostrategy Index scores demonstrates that companies have made significant progress in recent years, but more work remains to be done. For those unsure where to start, governance is usually the first step.

Geopolitical surprises are likely in the coming years, even for the most prepared companies. Having an effective geostrategy can enable executive teams to respond more quickly when political risk events – both foreseen and unforeseen – materialize, improve organizational resilience to geopolitical disruptions and support the viability of organizations’ global growth strategies. 

Geostrategy FAQs: How companies navigate geopolitical disruption

Additional contributors to this article include Lakshita Chadha, Arun Tom, Ritom Ghosh, Timothy Little and Kate Delgado-Kizer.

Summary

Despite rising geopolitical tensions, most companies remain committed to international growth. The organizations pulling ahead are embedding geostrategy across decision-making, strengthening preparedness, technology resilience, investment discipline and governance to navigate uncertainty with greater confidence.