Companies must adapt to a shifting world order

Photo by Duangphorn Wiriya on Unsplash

The world order is undergoing profound change and accelerating back to a kind of multipolarity which poses significant geopolitical risks to multinationals and international businesses. Ignoring these risks can lead to severe strategic blind spots and so businesses are advised to keep a very close eye on developments and to develop scenarios which can help them understand, anticipate and mitigate such risks.

The international system is increasingly interpolating more elements of the Yalta world - of great powers and spheres of influence - and lesser elements of the Helsinki world - of cooperation and peaceful resolution of conflict. At the same time, the unfolding order presents important globalisation features such as great power economic interdependency, powerful non-state actors capable of yielding significant influence, and shared advances in cyber and artificial intelligence. This complicates the picture further.

Looking back to the middle of the twentieth century, the end of World War II gave way to a bipolar order dominated by the US and the Soviet Union. This Cold War period was marked by ideological competition, an arms, technological and space race, and military standoffs and proxy wars, particularly in the Global South, but also by a degree of predictability brought about by the existence of two antagonistic ideological, political and economic camps.

When the Soviet Union collapsed in the early ‘90s, we entered the so-called “unipolar moment,” where the US stood as the undisputed global hegemon and where the West-led capitalism and liberal order went universal. Francis Fukuyama, in his seminal essay and work, called this moment ‘The End of History’, which many interpreted quite literally as to mean that the world of nations had managed to transcend ideological and power-driven conflict to settle permanently into some sort of global Pax Americana.

Fast forward thirty-five years to 2025, and the US unipolar moment appears increasingly a thing of the past. Some claim that we are headed towards a New Cold War between the US and China, based on the latter's rapid economic and military ascent and increased trade disputes, technological bans, military build-ups, and hostile rhetoric. Yet the reality is more complex. The Cold War involved no deep economic ties between the US and the Soviet Union, whereas today the US and China are deeply interdependent economically, commercially, and technologically, and although some form of de-risking is already happening, it is hard to envisage a scenario where total decoupling occurs.

Moreover, the Cold War was an existential ideological contest between communism on the one hand, and capitalism and liberal democracy on the other hand, with both the US and the Soviet Union looking to export their model, by force if necessary. Today, China’s hybrid model of communist one-party rule and state capitalism offers an alternative governance model, but Beijing is not exporting its ideology in the same way the USSR did, at least not through the use of brute force despite military posturing and drills in the South and East China Seas. Instead, it is both using existing institutions and creating new ones to pursue influence and present itself as a leader from within rather than a revisionist power.

So the world isn’t unipolar any more, but it isn’t bipolar either. Instead, it is heading towards a new form of polarity with a layered and, perhaps, laddered structure with the US at the helm yet closely followed by China, with whom it has a relationship that simultaneously includes elements of partnership, competition, and increasingly rivalry, especially when it comes to geopolitical competition in the Indo-Pacific and technological prowess.

Additional layers include a myriad of mid-sized powers orbiting and gravitating around these two giants - such as India, the EU, the UK, Russia, Turkey, Brazil -, which are forming more or less formal groupings and coalitions - such as the BRICS -, and global non-state actors such as tech companies and transnational criminal organisations who are also influencing the shape and direction of the international system.

To be sure, recent developments - from Covid-19, wars in Ukraine and the Middle East, and trade wars - are accelerating a shift towards a world that resembles more like Yalta and less like Helsinki, and indeed the window for great power partnership and healthy competition is narrowing. Yet the web of interconnectedness between great powers and between these and mid-size, yet growing powers, who are increasingly adopting more fluid hedging strategies, complicates any definition.

Should we need a label, we could define the upcoming system as multipolarity within a US-China bipolar rivalry where influence is being contested on every front and along different narratives. At the same time, this implies that the world is “in between orders”, thus raising the question of whether the system will drift further toward conflictual multipolarity or towards a hot US-China bipolarity, or whether it will find a new, and dare we say, more predictable and stable equilibrium.

This is not a theoretical exercise, for the implications for the world and for businesses are highly consequential. Indeed, monitoring geopolitical dynamics is crucial for multinationals and exporting companies because geopolitics shape the very environment in which they operate. Changes in the international system can take the form of national industrial policies, geo-economic fragmentation, supply chain disruption, regulatory uncertainty, loss of market access, and volatile investment climates. In more extreme scenarios, they can unleash violent inter-state conflict leading to trade disruption and heightened security and cyberattack risks.

Ignoring these risks can lead to severe strategic blind spots and so companies must prepare for the worse while advocating and hoping for the best. Yet anticipating and predicting outcomes can prove very challenging against such a fluid and rapidly changing landscape of shifting alliances and hedging strategies. So, in addition to traditional risk assessments and, in the case of multinationals and exporting / importing companies, supply chain diversification strategies, international businesses can engage and invest in scenario planning and road-mapping.

Most important of all, unlike ten years ago, where geopolitics was mostly considered a second-tier risk, today companies are advised to implement a top-down geopolitical risk culture which starts at the Board and is cascaded down to the entire organisation.