Inside the Strategy Room 248. Taking a proactive approach to geopolitics
Apr 24, 2025
Shubham Singhal, a Senior partner and co-leader of McKinsey's Geopolitics Practice, Cindy Levy, the global co-leader of the same practice, and Olivia White, a director at the McKinsey Global Institute, discuss the proactive strategies businesses can adopt in a shifting geopolitical landscape. They emphasize the importance of scenario-based planning and understanding trade dynamics, particularly with rising powers like Vietnam. The experts highlight risk-adjusted value creation and the necessity for resilience against sudden changes brought on by advancements like AI, urging companies to adapt and strengthen their governance.
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Defining Geopolitics for Business
- Geopolitics involves future government-driven developments and their ripple effects on business landscapes.
- It encompasses both known trade policies and hypothetical strategic scenarios affecting value chains globally.
Geopolitical Distance in Trade
- Trade's geographic distance remains high, but geopolitical alignment in trade corridors is decreasing.
- About 13% of trade crosses geopolitical divides, rising to 30% for critical, concentrated goods.
Build Scenario Analysis Muscle
- CEOs should map specific geopolitical scenarios to direct business impacts like top line and supply chain.
- Building in scenario analysis expertise helps translate macro trends into actionable enterprise strategies.