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How To Develop Geopolitical Resilience - McKinsey
How To Develop Geopolitical Resilience - McKinsey
How To Develop Geopolitical Resilience - McKinsey
I
n this episode of Inside the Strategy Room, we
feature a discussion on geopolitical resilience: what it
is, why companies need it, and how to build it in your
organization. We spoke with Ziad Haider, McKinsey’s
global director of geopolitical risk, Leo Geddes, co-lead
of our geopolitics client service, and Olivia White, a
director of the McKinsey Global Institute, about how to
navigate the shifting dynamics. This is an edited
transcript of their conversation. For more discussions on
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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the strategy issues that matter, follow the series on your
preferred podcast platform .
Exhibit 1
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Sean Brown: There’s been talk recently about the end of
globalization. Does your research support that view?
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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developing economies are net providers to other regions
of such resources. North America is a mixed story—not
as dependent on any region for any single thing, but
somewhat dependent on everyone for everything. Finally,
China and many developing regions are highly
dependent on others for IP. The nature of these
connections evolves over time but quite slowly. You see
only a percentage point or two shift in any given year.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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purchases 95 percent of its bananas from Ecuador even
though a number of countries produce bananas. This
highlights that companies are dependent on what’s
happening in just a few parts of the world.
Exhibit 2
— Olivia White
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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to shift from using one good to another varies
tremendously. For example, the wheat I buy from Russia
is largely the same as the wheat I buy from Ukraine,
Canada, or Argentina; not so for computer chips. And I
might choose to eat or feed my livestock corn or soy
instead of wheat in a pinch. I won’t shift from memory
chips to diamonds, for example.
Exhibit 3
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reduction in enterprise value. Many companies are
wondering whether they should shift out of some regions
or isolate their operations. We !nd that depends on the
nature of the connections, and that in turn depends in
large part on company type. We divide multinationals
into four archetypes: makers and deliverers, such as
automotive and retail companies; fuelers, such as oil and
gas companies; discoverers and technologists, where
pharma or semiconductors would sit; and !nanciers.
When a company asks, “How do I think about my China
operations?”, the answer is very di#erent if you are
selling into China than if you produce in China. It’s
important to distinguish between di#erent forms of
interdependency and the associated value at stake.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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the next ten years.
— Ziad Haider
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the $ows Olivia illustrated. A US o%cial I spoke with
recently said, “It’s very hard to do surgery on conjoined
twins.”
Ziad Haider: One watch point is, of course, trade and the
di#erent barriers currently in place. The second is
technology. The third one is human rights issues, which
are not just about values but have hard business
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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implications for supply chains. The fourth is domestic
politics, not just in the US and European capitals but in
China too.
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of scenarios covering both the extreme eventualities that
might come their way and “gray rhinos”—things you can
see coming but you need to take action to manage them.
The third part of sense and understand is around
feedback loops. Given the changing externalities,
organizations need to be able to learn and adapt, which
requires structures and systems that allow leaders to
shift their approach and posture as new information
surfaces.
— Leo Geddes
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again the importance of the board in helping steer the
organization as it deals with geopolitical externalities.
You can’t have a situation where the !rst time the board
talks about an issue is when it’s already a crisis. It’s
important to get the board into a mindset that they will
be expected to lead on geopolitical topics and need to
start discussing how they may react to various
circumstances.
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are found to be inauthentic, with one narrative externally
and something else internally.
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countries that are $ashing bright red from a geopolitical
risk point of view, but you need to bring a more granular
lens to your global footprint. One discipline we have seen
clients employ is a mapping exercise that di#erentiates
varying degrees and categories of geopolitical risk. Think
also about controls to put in place in each market that
help you manage the risk, then every month the
leadership team or the board reviews this document.
That creates a disciplined way to talk about geopolitical
risk versus getting pushed o# your beat by the next
headline or event.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-to-develop-geopolitical-resilience 11/11/23, 12 13
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Leo Geddes is a partner based in McKinsey’s London
o%ce, Ziad Haider is global director of geopolitical risk
based in the Singapore o%ce, and Olivia White is a
senior partner in the Bay Area o%ce. Sean Brown is
global director of communications for the Strategy and
Corporate Finance practice, and is based in Boston.
Search Openings
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