Businesses ill-equipped even as global uncertainty hits 20-year high, warns Davos study
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The Davos study warned that mounting risks facing the global economy have made volatility the new normal.
PHOTO: REUTERS
Follow topic:
- Global uncertainty surged to a 20-year high in 2025, exceeding the 2009 financial crisis and Covid-19 peak.
- Companies are poorly prepared for geopolitical risks like US-China rivalry and the Ukraine war, lacking integrated strategic processes.
- Geopolitical resilience requires anticipating risks, diversifying, and aligning company structure with strategic goals for long-term success.
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SINGAPORE – Global uncertainty surged to a 20-year peak in 2025, yet most companies remain poorly prepared to manage it, said a new report released on Jan 12 at the World Economic Forum at Davos, Switzerland.
The white paper, published by the World Economic Forum, IMD Business School and Boston Consulting Group (BCG), found that uncertainty levels in 2025 were more than four times higher than during the 2009 global financial crisis and about 50 per cent above the peak of the 2020 Covid-19 pandemic.
The findings were based on the International Monetary Fund’s Global World Uncertainty Index and the World Trade Uncertainty Index.
The study, which drew on 56 interviews with senior executives across industries and regions, warned that mounting risks facing the global economy have made volatility the new normal.
Senior executives pointed to shifting trade patterns, the erosion of multilateral frameworks, and the growing use of economic instruments as weapons as risks to business stability and competitiveness.
The most commonly cited geopolitical risks included US policy volatility and tariffs
Rivalry between the US and China is widely expected to remain intense as they compete to be No. 1 in technology and the economy. New breakthroughs in artificial intelligence will fuel that rivalry.
Despite rising risks, less than 20 per cent of companies have a dedicated geopolitics or international relations department, the study found.
While most boards and C-suite leaders are aware of the risks, most companies still lack integrated processes that connect geopolitical shifts with strategic decisions on investment, sourcing and sales.
“Too many companies treat geopolitics as a headline issue rather than a business capability,” said Dr Nikolaus Lang, global leader of the BCG Henderson Institute, vice-chairman of the BCG Center for Geopolitics, and co-author of the report.
Companies tend to be reactive, treating geopolitics on an ad hoc basis, rather than anticipative, and miss out on opportunities to mitigate risks effectively.
He said this model was no longer sustainable. The growing frequency and overlap of shocks now call for geopolitical strength and a structured approach to detect change, recalibrate and respond decisively at scale.
While a source of risk, geopolitics also creates opportunities for companies able to navigate it effectively. Potential mitigation measures include diversifying suppliers, adjusting production footprints and identifying partners or markets that require contingency planning, the report said.
Companies that develop these capabilities are better able to sense, adapt and build long-term resilience, said Mr Sean Doherty, head of international trade and investment at the World Economic Forum.
The study said there is no single model for building geopolitical resilience.
A company’s success depends on how well its structure, scale and strategy fit its ambitions across different markets and contexts. Success depends on aligning corporate strategic ambition and organisational structure, the study said.
It added that a company’s geopolitical team must have direct access to leadership to ensure speed and authority in moments of disruption.
