How should businesses respond as geopolitics moves to the centre of decision-making? Silvia Pepino argues it is now a structural, systemic and strategic force reshaping how firms assess risk, value and opportunity. As global fragmentation deepens, geopolitical pressures are influencing supply chains, finance, technology and investment – making them central to long-term business strategy.
Geopolitics is emerging as a major concern for business leaders and investors. This is reflected, for example, in global risk surveys, and in measures of geopolitical uncertainty.
As geopolitical uncertainty rises, mirroring what has been referred to as the “return of history”, businesses and investors face a more complex decision-making context. Indeed, geopolitics is becoming an increasingly important factor in the conditions that businesses and investors consider when making decisions.
This goes beyond short-term, tactical considerations in response to isolated geopolitical events. It reflects the shift of geopolitics from peripheral risk to core strategic consideration in response to a fundamental evolution of the global economic, social and political environment in which businesses and investors operate. This points to the need for decision-making frameworks in which geopolitical factors are embedded in how risk, opportunities and value are assessed.
To understand this change, it is useful to look at how geopolitics is evolving in relation to the broader business environment. The discussion can be organised around the “three S” of geopolitics for business: geopolitics is becoming structural, systemic and strategic. Together, these three features help explain how geopolitical, economic and market dynamics are interacting to shape business and investment decision-making for the coming years.
Geopolitics is becoming structural
First, geopolitics is becoming structural. Geopolitical risk operates over the medium to long term, rather than through one-off events or daily headlines. As the global order becomes more fragmented, the geopolitical backdrop increasingly reflects a durable configuration of international competition, strategic dependencies and economic fragmentation.
In the 1990s and up to the global financial crisis in 2008, the world was largely characterised by liberal globalisation and unipolarity. The US played a central role in security, finance and technology, while the global economy was organised around efficiency, openness and market integration. In that relatively stable world, geopolitical risk was often perceived as peripheral to core markets.
From 2008 to the early 2020s, the world moved towards greater strategic competition and fragmentation. China’s rise reshaped trade, technology and industrial competition, while strategic dependencies became more visible in semiconductors, energy, supply chains and critical inputs. Geoeconomic tools such as tariffs, sanctions and industrial policy have become increasingly prominent alongside traditional diplomacy.
The world now appears to be entering a further phase, characterised by a more multi-speed geopolitical order. Trade is becoming more multipolar and governance more modular, while technology and AI ecosystems remain relatively concentrated. As a result, strategic autonomy, resilience and sovereignty increasingly shape industrial and security policy.
This new environment cannot be disentangled from global macroeconomic imbalances. The United States remains in a significant net debtor position, while China and oil exporters are net creditors. Control over strategic inputs, from semiconductors to rare earths and energy reserves, is also highly concentrated.
Domestic pressures also matter. Many large economies have higher public debt levels than in previous decades, which may limit the capacity to cushion households and firms from shocks through fiscal policy. The Eurozone crisis showed how politics, institutions and market perceptions can interact in the pricing of sovereign risk. Wage dynamics, inequality and social pressures can also influence trade, border and external policies.
Geopolitics is becoming systemic
Second, geopolitics is becoming systemic. Its effects can propagate across countries, sectors and markets, moving through supply chains, financial channels, technology systems and policy responses.
A scenario involving a serious disruption in the Strait of Hormuz illustrates how a geopolitical shock can cascade across economic and social spheres that may initially appear far removed. A serious disruption in this strategic chokepoint would affect oil flows, but the effects could extend much further, including into natural gas, chemicals, fertilisers, transport, food prices, manufacturing and construction. Over time, the consequences could also reach geoeconomic policies, alliances, energy and climate policy, security and defence, and global finance.
A similar systemic logic is increasingly visible in finance. Geopolitics is increasingly recognised as a source of financial stability risk and a cross-cutting risk, entering credit risk, liquidity risk, market risk, operational risk and sovereign risk. Financial infrastructure and capital flows can become geopolitical instruments. Sanctions, reserve freezes, swap lines, payment systems and investment flows are increasingly used as tools of financial statecraft. Currencies and payment systems also increasingly intersect with sovereignty and geopolitical influence. Central bank digital currencies partly respond to concerns about strategic autonomy and dependency. The issue of possible reserve diversification also raises the question of how durable the dollar’s “exorbitant privilege” may be in a more fragmented world.
Geopolitics is becoming strategic
Third, geopolitics is becoming strategic. It increasingly affects the choices that shape long-term value: where firms invest, how supply chains are organised, which technologies are controlled, and which sectors, countries and companies gain or lose advantage. In this sense, it is becoming more central to business strategy and investment decisions.
Geopolitical shocks do not affect everyone in the same way. They can create winners and losers, reallocating advantage across sectors, countries and firms. Energy dependence is one example. Countries that depend more on external energy sources may be more exposed to oil shocks than countries with domestic resources or diversified alternatives. Critical minerals are another example. A larger share in processing can give countries higher leverage in international negotiations. Security concerns can also affect fiscal and industrial priorities, including defence spending.
For many years, decision-making focused mainly on traditional economic objectives such as efficiency, growth, openness and innovation. These objectives remain essential. But they are now being considered alongside geopolitical priorities such as resilience, security, control and sovereignty. This leads to strategic responses such as supply-chain diversification, industrial reshoring, technology export restrictions, investment screening, tariffs, and renewed attention to digital infrastructure.
From this perspective, several domains are emerging as strategic in an increasingly geopolitical economy, for example: energy systems; sovereign technology, including AI, semiconductors and cybersecurity; natural assets, including critical minerals, water, land, carbon and biodiversity; space and strategic infrastructure. Across these areas, economic value increasingly intersects with resilience, security, control and sovereignty.
