BCG Executive Perspectives Future Scenarios 16may2022

War in Ukraine:
Perspective
\\ on Future Scenarios
BCG Global Advantage and Corporate Finance & Strategy
Practice Areas
Prepared: 16 May 2022
Introduction to this document
The war in Ukraine is above all a political and humanitarian crisis
Russia's invasion of Ukraine has led to a serious It is the duty of political, societal, and business
humanitarian crisis. BCG condemns this attack leaders to navigate through this crisis. The objective
and the violence that is killing, wounding, and of this document is to provide an update about
displacing so many people. the global economic impact of the War in Ukraine;
and to enable thoughtful and expansive strategic
The top priority in moments like these must be the discussions about the medium term, using
safety and security of people. Corporations, potential future scenarios to help build resilience
Copyright © 2022 by Boston Consulting Group. All rights reserved.

governments, and not-for-profit organizations should and strengthen plans, beyond the near-term crisis.
focus on supporting the people in Ukraine, Russia,
Europe, and globally affected (physically and The situation surrounding Ukraine is dynamic and
mentally). rapidly evolving - this document reflects information
and analysis as of 16 May 2022. It is not intended as
a prediction of future events and is shared only as a
resource for BCG and client conversations.
2
FUTURE SCENARIOS
Navigating the global business landscape was already extremely challenging before
Russia invaded Ukraine. Now, business leaders must cope with new supply shocks,
deepening economic uncertainty, complex sanctions, and shifting geopolitics. The war’s
duration, scope, and outcome are all unknown.
How can organizations remain resilient in such a volatile environment? One key is to
consider a range of scenarios on how the future could unfold. Here are four plausible
BCG Executive scenarios that can help companies prepare for what comes next:
• Back to the Future. Major powers see the benefits of global cooperation and
Perspectives minimizing military conflict.
• Tripolar Competition. Three blocs coexist, each with its own norms and
IN THIS DOCUMENT institutions. North America and the EU lead a Western bloc and China and Russia
an Eastern bloc. A “nonaligned” bloc consists of nations seeking a third path.
• Limited Stalemate. Conflict in Ukraine and other non-NATO former Soviet

republics is chronic. China keeps its distance from Russia. Western-inspired global
institutions struggle to remain relevant.
• Global Escalation. Economic and military confrontations erupt in multiple

locations, redefining trade flows. Economic and military power supplants global
institutions.
Organizations should consider these scenarios when pressure testing business plans.
They should be ready to respond, whatever the outcome.
War in Ukraine: Perspective on Future Scenarios

Global Update and
Future Scenarios Uncertainties & 2030 scenarios
AGENDA Implications for businesses
Key takeaways for leaders

4
Summary | Scenarios help build strategic resilience amidst global uncertainties

The Ukraine conflict is a crisis that builds upon a range of other challenges, forcing leaders to build resilience in the face of
many geopolitical & societal uncertainties
Leaders should challenge themselves to look beyond potential Ukraine war evolutions, exploring the way other uncertainties
may unfold including geopolitical relations, trade & supply chains, financial stability, energy & climate, technology, and more
This document details a set of four contrasting stretched-yet-plausible scenarios for 2030 that can help with that exercise:
• Back to the future | Major powers see benefits in global cooperation and minimized military conflicts
• Tripolar competition | Western (primarily North America and EU) and Eastern (primarily China & Russia) blocs co-exist in
new balance, while "non-aligned" nations seek 3rd path; norms and institutions differ within and among blocs
• Limited stalemate | Chronic conflict in Ukraine & elsewhere in non-NATO former Soviet republics; China keeps distance from

Russia; economies survive sanction shock; West-inspired institutions struggle for relevance
• Global escalation | Economic & military confrontations erupt in multiple locations, disrupting trade patterns; economic &
military power supplants institutional system
The objective of these scenarios is not to "predict" the future, as there are multiple possible outcomes – but rather to
pressure-test business plans against different potential futures and to inspire strategies and actions that strengthen
preparedness, agility and resilience, regardless of what the future holds
5
How to use the scenarios described in this document
What scenarios What scenarios

ARE ARE NOT How to use them
Use the set of scenarios as a basis for
Representative of a Comprehensive or further reflection, and build them into
range of possible futures exhaustive your organization's decision making
Imagine what no-regret, contingent,

Stretched-but-plausible Predictions of what or other reactions may be most
pictures of different the future will be appropriate for your business to build

potential worlds resilience and strengthen strategy
A set of permutations A linear extrapolation Determine how your actions can best
of uncertainties; worlds of current trends and exemplify your values, and determine
in which we might have uncertainties how your organization's capabilities can
to operate positively influence the future
6
Source: BCG analysis.
Global economic impact of the war in Ukraine

War in Ukraine:
Global Update and Perspective on Future Scenarios
Future Scenarios
Uncertainties & 2030 scenarios
AGENDA
Implications for businesses

7
Multiple possible evolutions exist for Ukraine war, with direct potential
impacts for the business environment
Main factors driving conflict Potential conflict evolutions Key impacts for business
Balance of military power, and • Sanctions remain indefinitely
Fall of Ukraine
choice of tactics and weapons • Sustained isolation of Russia
Russian forces control full country
• Major re-build by Russia
Military
Sanctions & policy actions by David defeats Goliath • Sanctions remain indefinitely
"West," and Russia's response conflict
Ukraine repels Russian forces • Major re-build required
ceases
Military aid & support from Freeze in-place (Korea 2.0) • Certain sanctions lifted
third countries ("West" & other) Negotiated peace / de facto partition • Major re-build required
• Sanctions remain indefinitely

No end in sight (Afghanistan 3.0)
Peacemaking (bilateral, multi- • Significant socioeconomic impact
lateral or third-country brokering) Military Protracted stalemate
• Sustained isolation of Russia
conflict
persists Global spillover • Sanctions expand to other
Domestic political & economic Further conflicts in other theatres nations engaged in aggression
conditions in Russia
= Momentum scenarios (early May 2022)
Global scenarios required to go beyond war evolutions and navigate an uncertain medium term
8
Source: BCG analysis. Note: These analyses represent only potential scenarios and are not intended as a prediction or forecast.
Drivers of uncertainty Example dynamics
Geopolitical Dynamics among key countries, interplay of geopolitical

relations and trade blocs (e.g., "decoupling"), military implications
Strength of Changing role of institutions and rule-of-law vs. use of

Thinking institutions power; role of private vs. public sector in society
holistically
about the Trade & Shifting trade relations, interconnectedness, supply chain
supply chains re-shoring, creation of multi-local industrial hubs
medium term
means exploring Financial Capital market dynamics and flows, private lending &
dynamics associated stability investment, resilience of financial system
with seven key

drivers of Energy Energy mix, renewables, energy flows & security, potential
& climate embargos and alternatives (e.g., new LNG import capacity)
uncertainty
Technology Role of technology, "splinternet," creation of parallel social
& innovation & payment networks, artificial intelligence, automation
Recession or recovery, potential food security crises,

Consumption
change in consumer habits
9
Source: BCG analysis.
ILLUSTRATIVE & NON-EXHAUSTIVE; TO PROMOTE DISCUSSION Prepared: 16 May 2022
We have developed scenarios for ~2030 by exploring contrasting

permutations of these seven key drivers of uncertainty
Drivers of Back to Tripolar Limited Global

Axis end-points
uncertainty the future competition stalemate escalation
Geopolitical Alignment Polarization
relations & stability & insecurity
Strength of Institutions prevail, Power-based

institutions domestic & int'l relations
Trade & Free trade & Regionalization

supply chains hyper-globalization & reshoring
Financial Limited inflation Stagflation

stability & rising markets & instability
Energy Undisrupted Dependence

& climate transition & climate crisis
Technology
Acceleration Incremental
& innovation
Confidence Distrust
Consumption
& spending & recession
10
Focus on stretched-yet-plausible worlds for 2030
Four potential
scenarios
Back to the future Tripolar competition
for 2030 Major powers see benefits in global cooperation and Western & Eastern blocs coexist in new balance,
can support minimized military conflicts while "non-aligned" nations seek 3rd path; norms
and institutions differ within and among blocs
strategic
thinking
and help build

uncertainty
advantage
Limited stalemate Global escalation

Chronic conflict in Ukraine & elsewhere in non-NATO Economic & military confrontations erupt in multiple
former Soviet republics; China keeps distance from locations, disrupting trade patterns; economic &
Russia; economies survive sanction shock; West- military power supplants institutional system
inspired institutions struggle for relevance
11
ILLUSTRATIVE & NON-EXHAUSTIVE; TO PROMOTE DISCUSSION
Think of a
world where…
2030 scenarios
overview Back to the future Tripolar competition Limited stalemate Global escalation
Domestic conditions drive Eastern and Western poles Chronic conflict limited to Ukraine Major powers clash & military
Geopolitical leadership of global powers to coexist, while "non-aligned" & elsewhere in non-NATO former escalation spreads to other
relations pull back from confrontational countries seek a third path in Soviet republics; major powers theatres (e.g., Central Asia,
stance global affairs maintain confrontational stance Middle East, Indo-Pacific)
Eastern powers pivot to a balance In Africa and Asia, institutions Western institutions try but fail State-led protectionism &
Strength of
with global Western-inspired sponsored by major powers to align other powers; business nationalist policies shape socio-
institutions institutions coexist tries to shape global cooperation economic and political dynamics
Total global trade stable but Global trade plunges; chains

Global trade grows to historical Total global trade stable, but trade
Trade & regionalization shifts flows, and localize; resource-endowed
highs; Africa increases share of corridor mix-shift occurs as
supply chains intermittent supply shocks countries continue to provide
global supply chains supply chains near-shore
continue to disrupt costs/prices essential supplies
Sanctions & counter sanctions Capital shifts to private
Monetary policy alignment & Global financial markets
Financial limit capital flows, hindering investments, more opaque
markets integration support decouple limiting access to
stability lending, valuations and long-term than public markets; state
stocks & long-term investments capital
investment investments gain relevance

Politicization along bloc lines
Global policy coordination and Insecurity pushes US/ME LNG Fossil fuels & coal prevail in
Energy disrupts the global consensus
Chinese Greentech accelerate imports & renewables in EU, war economy & intensify no-
& climate on climate action, only partially
energy transition but EMs sustain high emissions return point in climate crisis
offset by Greentech developments
Innovation in AI & automation Innovation in decoupled Cybersecurity is top priority; Innovation focuses on hybrid
Technology push productivity but drive higher networks ("splinternet"), insecurity pushes metaverse as warfare capabilities &
& innovation inequality; Western networks & payment systems & strategic alternative to physical experiences; cybersecurity; local networks
platforms concentrate activity sectors as defense & space parallel networks keep growing develop to ensure independence
Expansion of global markets & Intra-pole demand increases Stagflation reinforces negative Local consumption shifts to
Consumption integration of Eastern players but policy-driven barriers lead to demand cycle & food crises basic goods & cryptocurrencies
supports demand growth shortages and inflation pressure persist in developing world enable e-commerce continuity
12
Each scenario would suggest different outcomes for key macroeconomic

KPIs that shape the business environment
Global
Global Trade
indicates direction GDP Trade % of GDP Oil Price temperature
vs. 2019 baseline1 Growth (physical goods) Inflation Price/barrel increase (°C) Business environment impact
Strengthened East-West joint markets

Back to highlight importance of global networks /
the future ability to work across borders and of
investments in long-term innovation
Tripolar world requires focus on regional

Tripolar ecosystems (e.g., through governments
competition partnerships) and investment on digital to
Major corridor
mix shift ensure operability across poles

Uncertainty requires focus on stagflation,
Limited
supply shocks and addressing humanitarian
stalemate
Regionalization crises leveraging corporate capabilities
War economy takes center stage, requiring

Global collaboration with local networks &
escalation governments to face supply shocks &
cost inflation
Reference (2019): ~3%2 56%2 ~2%2 $643 -

1. 2019 selected as pre-Covid baseline. Directions indicate temporary changes over the medium term; not static/permanent views; 2. World Bank; 3. Average Brent crude oil price, Statista. 13
War in Ukraine: Perspective on Future Scenarios

Global Update and
Future Scenarios Uncertainties & 2030 scenarios
AGENDA Implications for businesses

14
Scenario-specific implications detailed through early warning indicators,

geographic & sector considerations, and potential actions for leaders
Example early warning indicators

1
1 2 3 to signal scenario emergence
Implications on strength / vulnerability

2
for specific geographies and sectors

Potential actions for leaders to build
3
uncertainty advantage
On top of scenario-specific actions, several 'no regret moves' emerge across scenarios
15
Back to the future | Scenario-specific implications for businesses
Example Strong position Vulnerable position Actions to build

early warning uncertainty advantage
Geographies with…
Major exporting economies High reliance on regional
indicators and trade hubs trade networks / local supply
Beyond the headlines Build teaming & cybersecurity
Individual action
Lower cost base to attract Major production hubs with capabilities for a globalized
supply chains substitutable products environment and work across
• East-West trade
barriers: tariffs, Positive Foreign Direct Higher cost-base, risking job borders
export controls & Investment environment losses & investment crowd-out
sanctions Flexibility in pivoting public Implement automation/AI
Low agility in pivoting public innovations while protecting
resources & regulation resources & regulation
Global sourcing: flexible talent models and
relocation/upskilling
offshoring to low-cost Strong position Vulnerable position opportunities
markets, $B

Global markets & value chains High reliance on traditional Build capacity to securely
•
Sectors with…
Long-term energy sources access and monetize global

High labor intensity
investments: global consumer data
Strong long-term-innovation Examples:
corporate capital
expenditure, $B Examples: Build and leverage multi-country
Oil & gas supply chains enabled by
Ecosystem-wide
• Green energy Shipping & logistics digital fulfilment & strategic
development: Petrochemicals partnerships
renewable energy as Automotive
% of total energy Promote & invest in climate
action
Source: BCG analysis. 16
Note: These analyses represent only potential scenarios and are not intended as a prediction or forecast.
Tripolar competition | Scenario-specific implications for businesses

Geographies with…
Regional business ecosystems High reliance on global trade,
indicators within a single bloc for markets & supply chains
Beyond the headlines Adapt digital infrastructure &
Individual action
Strong regional financial No clear pole alignment cybersecurity to regional
• East-West trade markets Weaker position in regional ecosystems and ensure secure
barriers: tariffs, export Established position and public strategic industries interoperability
controls & sanctions support of strategic industries (e.g., mainly exporting parts
(e.g., semiconductors, defense) or specific software) Develop innovation capability
• Regional super apps: targeted to closer markets
# of super apps
downloads Strong position Vulnerable position Deepen customer & investor
relationships within closer

• Cross-pole business Regional markets, near-shore Global markets/ supply markets
Sectors with…
exposure: Revenues supply chains chains and exposure to global

outside of home pole, High capital & tech investments, capital flows
Nurture strong government
% of total innovation opportunities Limited state involvement
relationships to promote joint
Examples: Examples: investments
Ecosystem-wide
• Public investment in Fashion & retail
Aerospace & defense
local/regional
business: total Work with intra-pole public &
Semiconductors & Global MedTech private partners to accelerate
subsidies, tax reductions electronics
critical climate action
& direct investments, $B
Limited stalemate | Scenario-specific implications for businesses

Geographies with…
Robust food supply & export High dependence on food
indicators capacity supply chains
Beyond the headlines Strengthen supply chain
Individual action
Nation-wide developed cyber High exposure to refugee resilience by developing multi-
• Duration & reach of capabilities & digital economies flows sourcing alternatives, revisiting
conflict(s): months, # overall footprint
of countries in conflict Self-sufficient energy sources Sanctions and/or no clear
trade bloc alliance Strengthen cybersecurity
capabilities
• Defense/military
expenditure: % of Develop virtual offerings and
GDP Strong position Vulnerable position customer networks in
different countries to adapt
to consumer preferences

• Investment in cyber Regional & local markets Reliance on global supply &
Sectors with…
defenses: global Highly digital models, able to vulnerability to input shocks Redefine talent models to
spending on interact safely with customers Physical customer interaction respond to humanitarian crises
cybersecurity, $B (e.g., protect from food insecurity,
Examples: Examples: accommodate refugees)
• Refugees: # of Social media & services Agriculture & food Accelerate climate action to
Ecosystem-wide
refugees worldwide achieve energy resilience
Insurance Metals & mining
• Food prices: FAO Nurture government
Food Price Index partnerships to respond to
Source: BCG analysis. crises & build resilience 18
Global escalation | Scenario-specific implications for businesses

Geographies with…
Strong local markets & supply High reliance on global
indicators supply chains or trade
Beyond the headlines Developed cyber capabilities Assess possibility of local
Individual action
Strong production ecosystems Focus on services sector, spinoffs for global players
• Duration & reach of with strategic capabilities (e.g., especially with international
conflict(s): months, # semiconductors, defense) client base
Strengthen cybersecurity
of countries in conflict Self-sufficient supplies of Directly impacted by
capabilities to ensure ongoing
energy, food & water potential conflicts
consumer trust
• Defense/military
expenditure: % of
GDP Strong position Vulnerable position Accelerate automation to
accommodate potential talent
shortages

• Election of Localized supply & markets Reliance on global markets &
Sectors with…
nationalist/populist Flexible talent models to vulnerability to input shocks

leaders: # of leaders; accommodate insecurity Strong consumer orientation Strengthen local supply
% of GDP controlled High national importance chains, limiting reliance on
Examples:
Examples: global networks
Ecosystem-wide
• Global investment: Travel & tourism
Foreign Direct Oil & Gas
Investment flows, $B Global investment Secure critical resource
Aerospace & defense funds & PE firms reserves (e.g., energy, food)

6 high-level 'no regret' moves emerge as common across scenarios to

consider today and strengthen uncertainty advantage for the future
Embed geopolitics in Build supply chain

Invest in people strategy
decision-making resilience
Actively explore challenges Explore diversification Build flexible talent
& opportunities associated and/or re-localization of models to better support
with geopolitical risks; vulnerable inputs as employees and improve
embed robust risk analysis core risk management ability to respond to
processes organization-wide mechanisms regional talent mismatches

Innovate as a hedge Reinforce cybersecurity Accelerate climate action
Explore where digital / Invest in cybersecurity Double down on climate

virtual innovation can capabilities and develop action and explore
help limit geopolitical proactive risk mitigation strategic partnerships
exposure & strengthen mechanisms; explore gov't to achieve targets despite
competitive positioning collaboration opportunities disruptions
20
Global economic impact of the war in Ukraine

War in Ukraine:
Global Update and Perspective on Future Scenarios
Future Scenarios
Uncertainties & 2030 scenarios
AGENDA
Implications for businesses

21
Scenarios can help stretch perspectives, enabling stronger medium-term

strategy, more resilient decision making and proactive measures
Stretch your strategic decision-making

Takeaways for business leaders
Do not wait for an uncertain future to disrupt your strategy. Incorporate prospective
(not predictive) scenarios and competitive, dynamic simulations into your strategic
planning, and anticipate plausible ways your business environment may evolve.
Monitor and drive action

Identify risk-intelligent actions, big bets and no regret moves for your particular business,
monitor indicators & disruptions and move to action to prepare for potential future
challenges and shape opportunities, mobilizing partnerships, resources and investment

Influence positive outcomes
Understand how societal challenges may evolve, incorporate into ESG strategies and
nudge the future towards desirable outcomes on topics ranging from humanitarian
crises to climate change leveraging your capabilities.
Sources: BCG analysis and case experience. 22

Teams across BCG are actively monitoring impact
Global Advantage Practice Area Corporate Finance & Strategy Practice Area
Nikolaus Lang Ryoji Kimura
Managing Director & Senior Partner Managing Director & Senior Partner
Global Practice Area Leader, Global Advantage Global Practice Area Leader, Corporate Finance & Strategy
E: Lang.Nikolaus@bcg.com E: Kimura.Ryoji@BCG.com
Marc Gilbert Alan Iny
Managing Director & Senior Partner Partner & Director
Global Lead, Geopolitics & Trade Impact Global Lead, Creativity & Scenarios (Uncertainty Advantage)
E: Gilbert.Marc@bcg.com E: Iny.Alan@bcg.com
Michael McAdoo Jon Swan
Partner & Director Managing Director & Partner
Global Trade & Investment Global Lead, Uncertainty Advantage
E: McAdoo.Michael@bcg.com E: Swan.Jon@bcg.com

Kasey Maggard Hans Kuipers
Global Practice Management Director Managing Director & Partner
Global Advantage European Lead, Uncertainty Advantage
E: Maggard.Kasey@bcg.com E: Kuipers.Hans@bcg.com
Ken Carlstedt Elton Parker
Associate Director Associate Director
Global Trade Risk & Compliance Global Lead, War Gaming & Simulation (Uncertainty Advantage)
E: Carlstedt.Ken@bcg.com E: Parker.Elton@bcg.com
Ramón Baeza
Leandro J. Urbano
Managing Director & Senior Partner
Consultant
Global Lead, Disruption & Re-invention
E: Urbano.Leandro@bcg.com
E: Baeza.Ramon@bcg.com
23
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War in Ukraine:

Introduction to this document

The war in Ukraine is above all a political and humanitarian crisis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

• Limited Stalemate. Conflict in Ukraine and other non-NATO former Soviet

• Global Escalation. Economic and military confrontations erupt in multiple

War in Ukraine: Perspective on Future Scenarios

Key takeaways for leaders

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Summary | Scenarios help build strategic resilience amidst global uncertainties

Copyright © 2022 by Boston Consulting Group. All rights reserved.

How to use the scenarios described in this document

What scenarios What scenarios

Imagine what no-regret, contingent,

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Global economic impact of the war in Ukraine

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Drivers of uncertainty Example dynamics

Geopolitical Dynamics among key countries, interplay of geopolitical

Strength of Changing role of institutions and rule-of-law vs. use of

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Recession or recovery, potential food security crises,

We have developed scenarios for ~2030 by exploring contrasting

Drivers of Back to Tripolar Limited Global

Strength of Institutions prevail, Power-based

Trade & Free trade & Regionalization

Financial Limited inflation Stagflation

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Energy Undisrupted Dependence

Focus on stretched-yet-plausible worlds for 2030

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Limited stalemate Global escalation

Total global trade stable but Global trade plunges; chains

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Each scenario would suggest different outcomes for key macroeconomic

Strengthened East-West joint markets

Tripolar world requires focus on regional

Copyright © 2022 by Boston Consulting Group. All rights reserved.

War economy takes center stage, requiring

Reference (2019): ~3%2 56%2 ~2%2 $643 -

War in Ukraine: Perspective on Future Scenarios

AGENDA Implications for businesses

Key takeaways for leaders

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Scenario-specific implications detailed through early warning indicators,

Example early warning indicators

Implications on strength / vulnerability

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Back to the future | Scenario-specific implications for businesses

Example Strong position Vulnerable position Actions to build

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Long-term energy sources access and monetize global

Tripolar competition | Scenario-specific implications for businesses

Example Strong position Vulnerable position Actions to build

Copyright © 2022 by Boston Consulting Group. All rights reserved.

exposure: Revenues supply chains chains and exposure to global

Limited stalemate | Scenario-specific implications for businesses

Example Strong position Vulnerable position Actions to build

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Global escalation | Scenario-specific implications for businesses

Example Strong position Vulnerable position Actions to build

Copyright © 2022 by Boston Consulting Group. All rights reserved.