The Geopolitical Risk Your Strategy Is Ignoring

"Power" is the least understood transformative force. It is also the one most likely to surprise you.

You are probably monitoring technology shifts, watching consumer behaviour change, and keeping an eye on sustainability. Most leadership teams are.

But here is the question almost nobody is asking: what happens to your strategy when a government changes, a trade relationship breaks, or a regulator rewrites the rules you built your business around?

Power is the “P” in the SPINE framework, the taxonomy of transformative forces I developed from a review of 292 drivers of change across 88 academic articles. It covers the structural shifts in how the world is governed, from national politics to global order. And it is the force that most firms treat as someone else’s problem until it becomes theirs.

Let me break it down for you.

Two driver families, one force

Power operates through two driver families: World Order and Political Systems. Think of them as two levels of the same force. World Order covers how nations relate to each other: alliances, rivalries, trade blocs, and the rules governing international commerce. Political Systems covers how individual nations are governed: elections, regulation, policy direction, and institutional stability.

Both generate strategic opportunities and threats. Both are structural, playing out over decades. And yet both are woefully underused in strategic planning.

Let me walk you through each one.

World Order: The ground is shifting beneath your international strategy

If your firm operates across borders, the operating environment has changed more in the past 15 years than in the previous 50. The shift from a unipolar world dominated by the United States to a multipolar world shaped by the US, China, India, and the European Union has rewritten the rules for any firm with international reach.

This driver family contains several clusters that matter enormously to your strategy. Here are the ones you need to understand.

Geopolitics and great power competition

The US-China technology competition is the defining geopolitical shift of our era. It affects every firm that manufactures, sources, or sells across both blocs. Nvidia must simultaneously serve the Chinese market whilst complying with US export controls that restrict which chips can be sold there. Apple maintains manufacturing in China whilst navigating US regulatory requirements that tighten with each administration. Tesla operates Gigafactory Shanghai whilst managing political risk from both Washington and Beijing.

This is important: these firms are not caught in a temporary trade dispute. This is a structural realignment. It has been building for over a decade, it crosses every industry, and it will accelerate. If your supply chain touches China, if your revenue depends on access to either market, or if your technology could be classified as strategically sensitive, this driver is already reshaping your competitive position. The question is whether you are building around it or waiting for it to arrive.

Trade architecture and economic blocs

The globalising economy that many firms built their strategies around is fragmenting. Data localisation requirements mean that a firm operating in the EU, China, India, and the US may need four separate data infrastructures. Technology transfer conditions in some countries require sharing intellectual property that would be protected elsewhere. And sanctions regimes can make a supplier relationship that was legal last year prohibited this year.

The individual drivers within this cluster include trade agreements, tariffs, sanctions, export controls, and cross-border investment rules. Each one, taken individually, looks like a compliance issue. Taken together, they represent a structural shift in how the global economy is organised. A firm that built its strategy around continued trade liberalisation is operating on a premise that has been weakening for over a decade.

Defence and security reshaping commercial markets

Defence spending is rising across NATO, driven by the war in Ukraine and broader security concerns. This is not a temporary budget cycle. European governments have committed to sustained increases in military expenditure, and the commercial implications extend well beyond defence contractors. Cybersecurity, satellite communications, supply chain resilience, critical minerals, and advanced manufacturing all sit at the intersection of defence priorities and commercial markets. If your firm operates in any of these spaces, defence-driven demand is a structural tailwind that will compound for years.

Political Systems: The volatility closer to home

The second driver family covers how individual nations are governed. For most firms, this feels like background noise. Governments change. Regulations shift. You adjust and move on.

But the pace of that change has accelerated, and the scale of the shifts has grown.

Regulatory nationalism

Governments are increasingly using regulation as a competitive tool. The EU’s digital regulations (GDPR, the Digital Markets Act, the AI Act) set rules that firms worldwide must comply with if they want access to the European market. China’s data sovereignty laws restrict how information can flow across its borders. India’s production-linked incentive schemes redirect manufacturing investment toward domestic production.

For a firm with global operations, each of these creates a compliance obligation. Together, they create a strategic environment in which regulatory divergence across blocs is the norm, not the exception. Let’s be very clear: this is not going to reverse. The direction of travel is toward more regulation, more divergence, and more complexity. You can either build your operations to handle that structurally, or you can spend the next decade firefighting each new requirement as it arrives.

Governance volatility and political polarisation

The growing polarisation of politics in many democracies compounds the challenge. The emergence of Reform in the UK, the shifting coalitions in France, the remaking of American politics around issues that cut across traditional party lines: all of these create an operating environment that is less predictable than it was 30 years ago.

A pharmaceutical company that built its pricing strategy around one regulatory regime may face entirely different rules after an election. A technology firm that invested in a country’s data infrastructure may find its investment stranded by a change in data sovereignty law. A firm with significant exposure to a single country’s industrial policy faces concentration risk that has nothing to do with its competitive position and everything to do with the volatility of governance.

For most firms, political change is something to be weathered. A new government arrives, the firm adjusts, business continues. But for a firm that treats governance volatility as a structural change to build around, the response is different. You build flexibility into your operations so that a change of government does not require a strategic overhaul. You invest in government relations as a sensing mechanism, not a lobbying function. You diversify your geographic exposure so that dependence on a single regulatory regime is reduced.

Why most firms get Power wrong

Here is where the research gets interesting.

My content analysis of 120 annual reports showed that the firms which emphasised Power-related drivers of change, specifically policy and regulation and governing institutions, tended to fall behind their direct competitors. Nokia emphasised policy and regulation significantly more than Cisco. Amgen emphasised it significantly more than Gilead. HP emphasised governing institutions significantly more than Apple.

So does that mean Power does not matter?

No. It means most firms relate to Power defensively. They monitor regulation. They manage compliance. They treat political change as a risk to be mitigated. The language in their strategies reflects this orientation: shares, debt, regulations, law. Constraint and defence.

The opportunity is to flip that orientation. A firm that treats “the shift toward regulatory nationalism” as a structural change to build around, rather than a compliance burden to manage, can invest in operational flexibility, geographic diversification, and regulatory intelligence as strategic capabilities. The same change that creates cost and complexity for a defensive firm creates competitive advantage for an aligned one.

Nvidia is doing exactly this. Its entire product strategy now accounts for the geopolitical bifurcation of the semiconductor market, designing different chip variants for different regulatory environments. That is not compliance. That is building around Power.

What to do this week

Review your strategy and ask three questions:

First: does it name specific Power-related changes? Not “the geopolitical environment is uncertain,” but specific shifts: the US-China technology competition, the rise of regulatory nationalism, the fragmentation of trade architecture. If it does not, you are treating Power as background noise.

Second: can you trace any of those changes to a capital allocation decision? A geographic diversification investment, a regulatory capability build, a supply chain restructuring? If you cannot, the changes are noted but not acted on.

Third: are you relating to Power defensively (managing risk, ensuring compliance) or as an opportunity (building capabilities that become more valuable as the shift accelerates)? The firms that dominated their industries oriented toward opportunity. Their competitors oriented toward defence. The language in their annual reports told you which was which, years before the financial performance did.

What next?

Power is the transformative force that arrives without warning. A technology shift gives you a decade of signals. A demographic trend gives you a generation. A regulatory change can land in a single legislative session and strand investments overnight.

That is precisely why it deserves a place alongside Society, Innovation, Nature, and Economy in your strategic scanning. The firms that build around Power will not be caught adjusting when the next trade restriction, regulatory shift, or political realignment arrives. They will have built the flexibility and the capabilities to move with it.

The question is whether your strategy treats Power as someone else’s problem. Because right now, for most firms, it does.