DON’T OVERLOOK GEOPOLITICS IN YOUR BUSINESS SCENARIO FOR 2017
Many businesses entered 2017 with the anxiety of trying to anticipate challenges which they have to deal with in the New Year. By this time, all organisations should have their strategies firmed up with actions plans which would be them towards outcomes that have been pre-determined in their strategy formulation processes.
To ensure these action plans and outcomes are realistic, many organisations build their strategies on plausible scenarios based on their understandings of the markets and drivers which would influence key elements of the market. Without the benefit of having the ideas about what the year would be like, many strategies would likely be exposed to challenges which could be avoided if some attempt to predict the future is made.
Even before the outcome of the American Presidential election was known, the world was already seemed to be vulnerable to the power play of various superpowers which were jostling for their strategic edge. This could be seen from China’s claims over the various islands scattered around the South China Sea, the Russian and Iranian intervention in Syria and the emerging of what is now termed as “populism” as reflected in Britain and the Philippines.
The election of Donald Trump over a more conservative and predictable candidate not only shocked the Americans who voted for him but the world at large. Share and bond prices as well as the Dollar reacted. While we could not discount that some of these movements were driven by traders and speculators who thrive on uncertainties, economists and businesses are now considering his proposed policies seriously.
Even before taking the Presidential Oath, Trump trough his tweets, had caused few large corporations to reverse their business decisions. Instead of taking a more aggressive stand towards the Russians when it was revealed that they somehow tried to influence the outcome of the US Presidential election, he took a different course and created doubt over the decision of the sitting US President and the credibility of the American intelligence services.
Without doubt, the incoming American President would be different from his predecessors. How he would ensure his decisions are not in conflict with his vast business interests would be very interesting to observe. Perhaps, this is the very reason why Trump is favoured over other candidates by Russia and China as the superpowers could have many says in areas where Trump’s business empire may be exposed. The more you know about the weaknesses of your enemy, the better you would be, right?
If Trump is focusing on “Making America Great Again” by stimulating the US economy through spending and bringing back trillions of the Dollars from abroad through charging minimum tax on remittances, what would be the consequences to the rest of the world especially emerging economies? Would their currencies be further depressed, increasing the cost of business in an environment where capital is moving in the direction of the US? Wouldn’t this be an opportunity for countries like China to go in and providing them with funds to keep their economy floating while not bothering too much about governance and human rights matters in those economies, not like the Americans?
The above scenarios would be easily constructed from various analyses and commentaries about geopolitics and the incoming Trump administration. So, if your organisations are somehow caught in these vast possibilities, how would the market where you are operating in would look like and have your organisations came our with plans to see your businesses through for the short term before things are more clear, hopefully? These challenges and their impacts would also influence your suppliers and competitors and much as your customers. So, the implications could be significant enough for you to consider geopolitics seriously.
Given how the world is so interconnected, organisations should not take the view that they would be insulated by the forces of geopolitics. It is quite clear that the global economy would be influenced by at least two factors in the coming twelve months, the Trump presidency in the US and Brexit in Europe. In between, we have various big actors such as Russia and China and smaller regional actors which would be responding to the tone and music played around various issues from economy, trade, climate change, human rights and even cyber security. So many variables.
As we are in the early weeks of 2017, it would not be too late for companies to re-visit their strategies for the year if they have not considered geopolitics as one of the critical factors shaping the New Year. For those that have done so, perhaps a re-look may be warranted if the scenarios were concluded before President-elect Trump started tweeting about his the various issues like what he had done so far.