Geopolitical instability emerges as CEOs' top risk

McKinsey outlined five imperatives for managing global policy disruption.

Geopolitical instability has emerged as the most significant risk to corporate growth, according to a new McKinsey analysis, with sanctions, export controls and regulatory changes increasing exposure across international operations. 

The report highlights rising policy shifts, sanctions, export controls and supply chain disruption as key pressures reshaping global operations.

McKinsey outlined two potential long-term scenarios for businesses, comprising a diversified world with broadly open trade flows or a fragmented environment characterised by tighter controls and regional blocs. The firm notes that leaders should assess which scenario is more likely for their organisations and plan strategic responses accordingly.

With only about one-third of surveyed executives say they are confident in their ability to manage shifts in trade policy, McKinsey identified five imperatives for CEOs. These include building proprietary geopolitical foresight, evaluating risks and opportunities created by realignment, strengthening resilience and taking a more active role in external engagement.

The report adds that existing tools such as scenario planning and cross-functional nerve centres will need to be expanded as uncertainty persists. McKinsey concludes that companies integrating foresight, resilience and structured external engagement will be better positioned to navigate geopolitical disruption.