For decades, geopolitical risk lived at the margins of corporate strategy — acknowledged in annual reports, occasionally surfaced in board discussions, but rarely integrated into the operating decisions that determine competitive advantage. That era is over.
Research from EY-Parthenon's 2026 Geostrategic Outlook paints a stark picture: geopolitics is now the dominant force shaping the global operating environment. Approximately 60 percent of FTSE 100 returns are influenced by geopolitical and macroeconomic forces, and one in four global firms has experienced margin erosion since 2017, erasing an estimated $320 billion in profit. Yet the corporate response remains dangerously uneven — executives widely recognize the risk, but fewer than 40 percent report having robust frameworks to manage it.
The Gap Between Awareness and Action
The problem is not a lack of information. It is a lack of organizational architecture. Most companies lack a dedicated function responsible for translating geopolitical developments into operational decisions. Geopolitical risk analysis, where it exists, is typically housed within legal, compliance, or government affairs — departments that are essential but not designed to provide the real-time, forward-looking intelligence that C-suite decision-making demands.
What is needed is a geostrategy function: a cross-functional capability that integrates geopolitical intelligence, scenario planning, and stakeholder risk analysis into the core business processes of supply chain management, capital allocation, M&A diligence, and market entry and exit decisions.
What a Mature Geostrategy Function Looks Like
The most effective corporate geostrategy teams share several characteristics. They are cross-functional, drawing on expertise from risk, compliance, government affairs, technology, and operations. They maintain a standing intelligence capability — not outsourced to a third-party vendor producing quarterly reports, but embedded in the organization with access to decision-makers. They operate on multiple time horizons: monitoring near-term triggers such as elections, sanctions updates, and regulatory changes while maintaining longer-range scenario models.
They also focus on second-order effects. The direct impact of a tariff is straightforward to model. The second-order impact — how it reshapes competitor behavior, customer sourcing, and regulatory posture in adjacent markets — is where the real strategic value lies.
The 2026 Landscape Demands It
Several converging trends make this a tipping point for corporate geostrategy. The U.S. is reshaping its economic and geopolitical relationships through a more transactional approach to foreign policy, creating uncertainty in alliances and trade agreements that were once considered stable. China's growing trade power is pressuring European manufacturers and prompting Brussels to deploy defensive trade instruments. Upcoming elections across multiple regions carry market-moving potential. Regional instability in the Middle East, South Asia, and Latin America adds further variables.
Meanwhile, digital sovereignty is fragmenting the technology landscape. Countries are asserting greater control over digital infrastructure, data, and AI systems, creating compliance complexity for companies operating across borders. Energy and critical mineral competition is intensifying. And sanctions regimes are becoming more numerous, more granular, and more aggressively enforced.
Any one of these forces would warrant attention. Together, they create an operating environment where geopolitical analysis is not a nice-to-have — it is a survival requirement.
Starting the Journey
For organizations that do not yet have a dedicated geostrategy capability, the first step is an honest assessment of current exposure. Where are your supply chains geographically concentrated? Which revenue streams depend on regulatory stability in volatile jurisdictions? How would a sudden change in trade policy or sanctions designation affect your operating model?
From there, identify the decision points where geopolitical intelligence would change the outcome. These are typically capital allocation, M&A, market expansion, and vendor selection. Build the analytical capability around those decision points, not in a silo.
Finally, invest in the people. Geostrategy is a discipline that requires both analytical rigor and contextual judgment — the kind of judgment that comes from deep regional expertise, diplomatic experience, and real-world intelligence backgrounds.
