It’s increasingly clear that companies cannot avoid geopolitics and political risk: mentions of geopolitics and political risk in companies’ public documents skyrocketed 600% in 2022 and have remained three to four times higher in the past two years than prior to 2022, as shown in the figure below. It’s not just talk – companies are seeing material impact on political risk.
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Read moreTwo primary areas of impact stand out. In the EY-Parthenon Geostrategy in Practice Survey 2025 of more than 1,000 global executives, more than 60% of these executives point to negative impacts on their companies’ operations and supply chains. Additionally, 57% say they have suffered negative impacts in terms of reputation and compliance.
These impact areas are hardly surprising given policymakers’ priorities, as highlighted in the 2025 Geostrategic Outlook. Governments around the world have implemented industrial policies and trade protectionism to onshore, nearshore and friendshore production of critical products and strategic sectors. We’ve also seen the heightened use of sanctions and the introduction of more anti-sanctions policies in recent years. There has also been a flurry of regulatory activity, particularly surrounding sustainability and artificial intelligence (AI), with important divergences in regulation across major markets.
Given this impact, it’s also not surprising that all executives surveyed said geopolitics had driven strategic changes at their companies, with a focus on supply chains. Our in-depth interviews with dozens of global executives provide additional insights into when, how and why companies are choosing to shift their supply chains to adapt to emerging geopolitical realities.
The good news is that we know, from the EY-Parthenon Geostrategic Business Group team’s work with clients and in-depth research, that most companies have started to take action across all aspects of geostrategy in the Geostrategy Framework (via EY US).
Ninety-four percent of companies have increased the time and resources they invest on geostrategy in the past 24 months. This investment is widespread. More than half of executives say their company now invests more in each geostrategic action area – scan, focus, manage and strategize – with the most significant increase in scanning to identify and monitor political risks.
Companies’ geostrategic investments appear to be paying off. There are now 50% more Geostrategists – the companies that are the most proactive and comprehensive in their actions to strategically manage geopolitical risk – than there were in 2021. Moreover, longitudinal data from Geostrategy in Practice surveys shows an increasing trend for companies to take action across multiple levels of their organizations – from 24% in 2021 to 37% in 2025.
But there is more work to be done. One-third of global executives were surprised by most or all political risks that impacted their companies in the past 24 months. And 77% were surprised by risks that impacted their business at least half the time. Only 45% of companies clearly assign ownership of geostrategy to an individual, dedicated function or cross-functional committee. Executives recognize this imperative: 93% of them plan to invest more time and resources in geostrategy in the coming years.
While many companies are taking action to improve their geostrategic capabilities, the process of getting to grips with geopolitical risks and opportunities remains a work in progress. Companies that proactively implement a geostrategy to improve resilience are well-positioned to improve value and gain a competitive advantage.
For instance, several manufacturers that shifted supply chains to reduce geopolitical risk exposure – either through diversification or localization strategies – found that they could control operational costs and enhance innovation. Despite costs initially increasing, a North American manufacturer has seen a more resilient and efficient supply chain emerge as a result of the shifts they made. An Asian manufacturer similarly saw a short-term hit to profitability as a result of creating a more geopolitically resilient supply chain, which quickly led to more innovation that subsequently restored profitability.
Incorporating political risk into strategic decisions has also yielded results. For instance, EY teams worked with a company to model the impacts of a new law in one of their key markets, which was used to guide decisions about the relative competitiveness of production facilities. Another client proactively incorporated political risk assessments into its M&A diligence process. This enabled executives to anticipate and prepare for a range of potential political risks associated when acquiring another company.
Some of the most frequent questions we get from clients are: What are other companies in my sector doing? How are they adapting their strategies to geopolitical risks? How do my company’s actions measure up?
How does your company's geostrategy compare?
The EY-Parthenon Geostrategy dataset provides a baseline for a robust benchmarking exercise.
The figure below illustrates a high-level answer to those competitive questions at the sector level. There are Geostrategists across all sectors, although there is a higher concentration of them in the retail, power and utilities, real estate and construction and telecommunications and media sectors. Interestingly, some of the sectors that are most in the crosshairs of governments’ economic sovereignty policies – such as technology and aerospace and defense – have the lowest concentration of Geostrategists.
Across the board, Geostrategists are taking many more actions to strategically manage political risk on a regular or proactive basis, with those assessments proactively woven into how they do business. Geostrategists also outperform other companies at taking these actions in a more comprehensive way across the organization, including at both the enterprise level and the business unit, functional or country level. Crucially, they also take different strategic decisions.
What makes a successful Geostrategist? Five habits emerge from this study:
Chapter 1
Geostrategists stand out by reconfiguring supply chains to effectively manage geopolitical risks, ensuring resilience and adaptability in an increasingly complex global landscape.
For almost two-thirds of companies, political risks had a negative impact on operations and supply chain. It’s no surprise, then, that two of the top three strategic changes companies have made in the past 24 months were reconfiguring supply chains and relocating operational assets.
In demonstration of this, the Chief Strategy Officer at a Europe-based company shared, “In recent years, the increasing geopolitical tensions and trade restrictions between major global powers have intensified, and the need to diversify supply chains and reduce dependency on any single market is vital now more than ever.”
Geostrategists are more likely than other companies to have altered their supply chains in response to political risks in the past 24 months. That doesn’t mean that all executives should rush out to reconfigure their company’s supply chains. They first need to assess the political risk exposure across their operations and supply chain before making strategic decisions.
The increasing geopolitical tensions and trade restrictions between major global powers have intensified, and the need to diversify supply chains and reduce dependency on any single market is vital now more than ever.
For instance, a manufacturing executive maps their company’s entire supply chain to find pockets of risk. If there is a concentration of risk, they might work to find a new supplier or redesigning the product to reduce exposure.
Similarly, a life sciences company’s quarterly strategic review process highlighted specific vulnerabilities in their current supply chain, leading the executive team to elevate the geopolitical assessment to the board. The company ultimately decided to relocate operational assets and reconfigure its supply chain.
Executives should start by determining their company’s political risk profile. A company’s political risk profile has two components. The first is the level of exposure to geopolitical risks across its revenue, operational footprint and suppliers. The second is its geostrategy capabilities, as measured by our Geostrategy Index.
Each of these four distinct political risk profiles has a different set of strategic imperatives for adjusting a company’s supply chain to geopolitical realities, ranging from dual-sourcing strategies to expanding supplier presence in geopolitically aligned markets.
Chapter 2
Geostrategists integrate political risk into investment decisions, enhancing M&A success and optimizing growth strategies amid geopolitical uncertainties and macroeconomic challenges.
Geostrategists and the most confident CEOs are more often applying such a political risk lens to their strategic decision-making, which enables them to have a stronger M&A appetite and carry through on their planned transactions at a higher rate than other companies. This can save companies time and resources when it comes to their growth and investment efforts.
Macroeconomic uncertainty, along with major central banks taking a “higher for longer” stance on interest rates, has been weighing on global investment. Cross-border M&A is decelerating: From 2020 to 2024, cross-border M&As accounted for just 26% of annual deals by value, down from an average of 34% from 2007 to 2011.
In the January 2025 edition of the EY-Parthenon CEO Outlook, deal appetite was highest among the most confident CEOs, with seven out of 10 signaling a strong M&A appetite for the next 12 months, while only 17% of the least confident business leaders had the same ambitions. The September 2024 edition of this study found that 85% of the most confident CEOs often or always incorporate political risk into their transaction decisions, compared with only 64% of the least confident CEOs.
The Geostrategy in Practice 2025 survey results show that all Geostrategists conduct political risk due diligence when evaluating a potential transaction, and 73% do so on a regular or proactive basis. Only 34% of the Observers do the same. Geostrategists were less likely than other companies to have delayed a planned divestment in the past 24 months, suggesting a clear link between political risk management and action.
Companies are increasingly incorporating political risk into due diligence processes – particularly for market entry. In one instance, a manufacturing company selected a particular Eastern European country as the location for a new factory in part because it was geopolitically balanced between their major end markets. Meanwhile a life sciences executive highlighted their company’s pursuit of acquisitions to manage regulatory risks in a key growth market.
Chapter 3
Executives increasingly face unexpected geopolitical risks. Enhancing monitoring and scenario analysis can improve preparedness for unforeseen geopolitical events and strengthen resilience.
More than one-third of executives surveyed report being surprised by political risk events or their impacts most or all of the time. Another 42% of executives were surprised about half of the time. This is a dramatic increase in the unexpected nature of political risk impacts from just four years ago. This stands to reason, given that companies have been repeatedly surprised by an array of black swan and gray rhino geopolitical events, including the war in Ukraine, the conflict in the Middle East, the outcomes of various national elections and tariff rate volatility.
Companies can better prepare for such unexpected events in two ways. The first is to improve their political risk identification and monitoring systems. Executives should prioritize dynamic ongoing monitoring of political risks. Political risks should be included as part of a company’s risk register or other risk identification processes – and this intelligence should be regularly shared with the C-suite. Companies should collect quantitative metrics on political risks wherever possible, to enable more seamless integration into risk registries and other internal business models.
We have strengthened our risk management framework. It now involves enhanced scenario planning, stress testing, and contingency planning for various geopolitical events.
The second is to use scenario analysis – the systematic exploration of multiple plausible futures – to better anticipate and plan for otherwise unforeseen political risk events. The range of actors and risks across geopolitics, country politics, regulators and society create a dizzying array of potential outcomes – but scenario analysis helps to structure that uncertainty in an actionable way. Scenario analysis also helps organizations respond quickly to new situations outside of their scenario set as a result of more imaginative strategic planning and operational agility.
A manufacturing company executive reflected that, “We have strengthened our risk management framework. It now involves enhanced scenario planning, stress testing, and contingency planning for various geopolitical events. We are expanding our risk management team to include experts in political risk analysis.”
Geostrategists are more likely to have invested significantly more time and resources in their political risk “scanning” capabilities in the past two years than other companies. They are more likely than other companies to use political risk scenario planning to design and test strategy – with 66% of Geostrategists doing this regularly or proactively. These companies also use scenario analysis to proactively identify risk mitigation measures.
For example, EY teams helped a financial services provider based in the Asia-Pacific region to understand how geopolitical tensions between the US and China might evolve in different scenarios, and how each of these could affect its business. In particular, they wanted to assess the implications of the various scenarios for capital flows, liquidity and currency volatility in the short and medium term. The exercise identified signposts for adjusting their financial structure or capital portfolio.
Chapter 4
Boards are increasingly focused on geostrategy, with 76% taking action on political risk. Regular assessments and briefings are essential, yet many still address these issues infrequently.
While Boards have always engaged in political risk topics to some degree, there has been a noticeable uptick in Directors’ attention to geopolitics in the past couple of years. The EY-Parthenon Geostrategic Business Group and the EY Center for Board Matters have recently co-hosted multiple events on geostrategy – including roundtable discussions and a scenario planning exercise – in response to Directors’ requests for this topic to be on the agenda.
The shift in focus is supported by our survey data. In 2021, only 26% of Boards took action, on average, across seven identified geostrategy areas. In 2025, that share rose to 76%. The top two areas of action today are Boards regularly assessing the impact of political risk on the company's existing strategy (84%) and receiving regular political risk briefings from company functions such as public affairs or risk management (82%).
Assessing impact on current strategy and geopolitical briefings, whether from internal functions or external advisors, are only the tip of the iceberg. When and how Boards engage on geostrategy matters as well. Despite significant impacts on companies’ operations and strategies, only about one-third of companies’ boards include political risk as a frequent agenda item. More than half of Boards include it as an annual agenda item – which is likely too infrequent to effectively manage an increasingly dynamic geopolitical environment.
Boards also need to assign responsibility for political risk and geostrategy to one of their committees to ensure consistent oversight and attention to these issues. Encouragingly, about three-quarters of executives say that their Boards have done this – up from only one-third of Boards four years ago.
Another manufacturing company executive commented on this point that, “The complexity and volatility of the global landscape have called for a more robust and agile governance framework. One of the key changes is we now have a dedicated Geopolitical Risk Committee within our Board of Directors.”
The boards at companies that are labeled Geostrategists are even more likely to have a committee responsible for geostrategy oversight (82%). Geostrategists’ Boards also assess the impact of political risk on current strategy and receive regular geopolitical briefings from company functions at a higher rate than other companies’ Boards.
One of the key changes is we now have a dedicated Geopolitical Risk Committee within our Board of Directors.
More significantly, 85% of Geostrategists’ Boards incorporate political risk into future-oriented strategic decisions, including M&A and market entry. More engaged Boards that understand the impact of geopolitical shifts not only on current operations and strategy but also weave those assessments into decisions about future competitive positioning will likely be more resilient to future geopolitical surprises.
Chapter 5
Geostrategic governance requires cross-functional collaboration, with committees now leading oversight.
Geopolitical crises clearly call for a cross-functional approach. At a technology company, for instance, political analysis and decision-making involved the supply chain, procurement, manufacturing, finance, strategy, government affairs and legal teams. A life sciences company’s risk assessment was jointly determined by the supply chain, risk and legal teams – which then presented their recommended strategic response to the board.
The evolving geopolitical landscape, with increasing risks and uncertainties, has forced us to adopt a more agile and robust governance framework to ensure that we can effectively navigate these challenges.
But effective governance is cross-functional and collaborative every day. As discussed in Geostrategy by Design, this requires oversight from above that enables various teams to complement each other while supporting coordination across the geostrategic areas. The intention should be to ensure that the scan, focus, and manage activities become more balanced, so that they can collectively inform and coordinate with strategy.
As an example of this topic, a life sciences executive shared, “The evolving geopolitical landscape, with increasing risks and uncertainties, has forced us to adopt a more agile and robust governance framework to ensure that we can effectively navigate these challenges.”
There has been a notable shift toward this style of cross-functional governance within executive teams. In 2021, the most common structure was to assign geostrategy responsibility to a particular function or business unit (52%), with a committee approach in second place (39%). That has now flipped. In 2025, a committee is the most popular geostrategic governance structure (52%), and the number of executives at the geostrategy table has almost doubled.
Who is at the table has shifted significantly as well. The chief risk officer retains some responsibility for geostrategy at about half of companies. But the other three of the top four roles with geostrategy responsibility are newcomers: the general counsel, the chief compliance officer and the head of public policy. This likely reflects the dynamic international sanctions environment since the start of the full-scale war in Ukraine in 2022, as well as the introduction of significant new regulations in a variety of markets.
There is still room for improvement. In Geostrategy by Design, four roles are identified that can add real value to political risk management, aligned to the four key competences within the geostrategy framework: the head of public policy, chief operations officer, chief risk officer and chief strategy officer. But only 1.5% of companies include all four of these crucial roles on their geostrategy teams today.
Geostrategists embrace many of these governance principles. Responsibility for geostrategy is much less likely to be concentrated in an individual, with these companies instead leveraging committee or team governance structures. But even the Geostrategists have room for improvement in terms of who has a seat at the geostrategy table.
This highlights an important point for all business leaders. Geostrategy is never “done.” It is an ongoing process. The question that executives should ask is: Do we have an effective strategy to manage political risk exposure and seize potential opportunities? Those opportunities may seem scarce in an era of heightened geopolitical volatility – but they do exist. Companies that have an effective geostrategy will be better positioned to spot those opportunities.
How does your company's geostrategy compare?
The EY-Parthenon Geostrategy dataset provides a baseline for a robust benchmarking exercise.
Becoming a Geostrategist will require new investments in geostrategic capabilities. Doing this well may not be easy but it can yield material benefits. It can set up companies for greater success in anticipating and effectively managing the geopolitical surprises such as those companies have faced in the past two years. Having an effective geostrategy can also enable executive teams to respond more quickly when political risk events materialize. That can improve organizational resilience to today’s geopolitical challenges – and to whatever geopolitical tensions or other political risks may arise in the future.
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