The world is interconnected, and geopolitical tensions have a direct impact on international business. The escalation of conflicts, sanctions and trade restrictions can dramatically change market conditions and affect the global economy. Ultimately, these events can create significant legal and operational risks for businesses that operate within affected regions.
A comprehensive understanding of Geopolitical risk is critical to the success of any international business venture. Geopolitical risk encompasses many factors that can influence the performance of a business, including the regulatory environment and the security of operations. Depending on the severity of these factors, Geopolitical risk can have severe consequences for a company’s bottom line.
Intermediate Understanding
National governments are primary players in energy and sustainability geopolitics, pursuing their national interests through foreign policy and strategic alliances. However, international organizations like the IEA and the UNFCCC, multinational corporations, and even non-governmental organizations also play significant roles. These entities have their own distinct agendas and power dynamics that can intersect and conflict with the global energy transition, creating a complex tapestry of potential geopolitical tensions.
In addition, the global supply chain for renewable energy technologies has become a new front in geopolitical competition, with nations competing for leadership in key sectors like solar, wind and batteries. A disruption in these supply chains can have far-reaching implications across industries and countries, affecting both production and consumption. This can trigger supply shortages and increase operating costs for businesses, causing a shift in investment or growth plans or the need to reshoring operations.