Geopolitical Risks Must Be Accounted ForThe Apple example made it clear that conflicting values can shape global business dynamics. It is therefore essential for companies to integrate geopolitical risk into their strategic decision-making – on par with considerations such as production costs, quality, supply chains, innovation, intellectual property (IP), branding, and political relationships.
Failing to address these factors risks leaving companies trapped in crises that could cost them both financially and reputationally. As Professor Santangelo stressed, many firms would do well to reconsider how they are positioned for the future.
Exit, Disengagement, DistanceProfessor Santangelo pointed to three strategic options that companies may consider: Exit, Disengagement, and Strategic Organisational Distance. Each approach involves trade-offs that companies will weigh differently, depending on their specific risk profiles.
For example, Samsung shut down all of its factories in China between 2019 and 2023 due to mounting political and regulatory risks. Volkswagen scaled back its operations in China in response to the repression of minority groups, and Shell ceased all new investments in Russia after the invasion of Ukraine and began divesting from the market.
In such geopolitical storms, companies cannot rely on a one-size-fits-all model. Instead, they must assess the specific pros and cons of full withdrawal, reduced engagement, or organisational restructuring to create distance.
A seemingly attractive option like Strategic Organisational Distance may reduce a company’s local visibility, but as Professor Santangelo pointed out, it often comes at the expense of effective communication and introduces greater management friction and higher administrative costs.
Risks and RewardsProfessor Santangelo raised the following critical questions: What is the most significant trade-off businesses face when pursuing strategic organisational distance? And how can a company justify such actions to customers, investors, employees and other stakeholders?
Outcomes are far from uniform. Danish companies such as Ecco and Carlsberg have received markedly different reactions to their continued presence in Russia. As one participant noted, Ecco never positioned itself strongly in terms of values and faced little political backlash when it chose to remain. In contrast, Carlsberg had actively aligned itself with political values and quickly announced its intention to reduce its involvement, later selling its assets in the country.
Legal Disputes and Forum ShoppingAs Professor Santangelo observed, threats are coming from many directions – and legal action is increasingly being used as a strategic weapon. Disputes, including those over IP infringements, are now often brought before unexpected courts and jurisdictions. Many companies today engage in forum shopping: deliberately choosing the legal system or jurisdiction that offers the greatest chance of a favourable outcome.
While forum shopping can be effective, it also brings side effects and potential downsides. Pursuing a case in one’s home country – such as for IP violations – may offer home advantage but doesn’t necessarily strengthen rights in practice. Litigating abroad may carry high risk and offer little deterrence, especially if the rulings lack credibility.
A more neutral option is to pursue cases in an impartial, internationally recognised court – for example, in the Netherlands. This can send a strong signal that the company is confident in its rights and capable of winning on neutral ground.
But forum shopping is not for everyone. As Professor Santangelo pointed out, it is expensive, primarily accessible to large firms, more effective in some industries than others, and highly sensitive to political shifts.
Strategies and Practical AdviceUnpredictability is a defining feature of today’s geopolitical turbulence. As Professors Mol and Santangelo noted, companies respond in different ways – but their choices are anything but trivial.
Some companies rely on the passage of time, hoping the dust will settle. Others say one thing and do another – for instance, many promises made between 2016 and 2020 to bring production back to the US were never fulfilled. Still others try to localise problems to prevent them from affecting the entire organisation.
Every company must carefully assess its risks before selecting a strategy. But at a minimum, they should have a clearly defined geopolitical strategy – one that accounts for differences between countries, industries and organisational levels. And crucially: how can that strategy be put into action?
As Professor Mol highlighted, the first step is to build internal expertise and ensure analyses are robust. Second, companies must improve their understanding of risks in both current and potential investments – and temper past optimism where necessary. Third, they must develop and evaluate multiple scenarios, incorporating them into impact assessments and decision-making, whether considering entering or exiting foreign markets.
Is Your Strategic Toolbox Up to Date?So, what does your toolbox contain? Professors Mol and Santangelo closed by encouraging leaders to consider the following questions:
- Have you perhaps leaned too heavily on a comfortable, pro-freedom worldview?
- What cognitive biases are preventing you from recognising and addressing geopolitical change?
- How can – and should – you shift those mental frameworks?
- How can you and your organisation sense, adapt to and even leverage geopolitical transformation?
