The global economy is edging closer to increased division rather than cooperation. Geopolitical fragmentation is expected to further accelerate by the end of 2025, and how businesses respond to those pressures could be crucial for sustainable growth.
Geopolitics is positioned to be one of the main drivers of business competitiveness, and how economies and businesses respond to those trends and drivers will reshape what it means to be competitive, according to a new report from the World Economic Forum.
“Since 2022, governments have increasingly deployed tariffs, subsidies, export controls, and restrictions on technology transfer to advance geopolitical goals,” the report, Global Economic Futures: Competitiveness in 2030, said. The report labelled nearly 80% of 5,716 policy measures recorded in that time span as “discriminatory”.
As further fragmentation risks loom, leaders are looking for ways to stay on the map.
One-third of employers globally expect geopolitical conflict to be a key driver of business transformation by 2030, and many developing economies, particularly in Asia, have moved rapidly up the global value chain by investing in diversification, talent, infrastructure, and technology diffusion, the report said.
Companies that actively prepare for geopolitical risk — through supply chain diversification or investment and operational decisions — are better positioned to prosper through disruption than businesses that prioritise short-term defensive measures, the report said.
Risk-proofing supply chains
Securing access to fragmented markets has challenged businesses since 2020, and many companies have been forced to pursue hyper-localised, regional supply chains, limiting trade networks.
From Shock to Strategy: Building Value Chains for the Next 30 Years, another report from the WEF, found that shifts to regionalised value chains could increase the risk of isolated industrial zones developing their own standards, leading to increased fragmentation.
In response to fragmentation challenges, diversification and supply chain duplication strategies are now widespread, the Global Economic Futures report noted. Businesses are looking to rapidly restructure operations to align with new geopolitical divisions and secure access to fragmented markets.
Preparing for an uncertain future
Strategic agility and resilience are now crucial, and cost efficiency is no longer enough to stay ahead of the curve. Stringent and loose regulations could threaten to erode prosperity and convergence in the future, leading to further geopolitical instability and more fractured markets, the Global Economic Futures report said.
Businesses must “strengthen geopolitical risk functions and build agile governance and organisational structures that enable real-time decision-making”, by balancing responsiveness, adaptation, and strategic resilience, the report said. Businesses should also “invest in cross-industry risk management systems, strengthen operational and financial buffers, and increase supply chain flexibility, efficiency, and resilience”.
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