Corporations Must Re-learn How to be Geopolitical Actors

Beginning during the global pandemic, accelerating after the 2022 invasion of Ukraine and intensifying during the recent Middle East conflict, geopolitics has become a prime concern for business. According to the McKinsey Global Survey on economic conditions, business leaders have identified geopolitical instability as the primary risk to growth in every quarterly survey since March 2022 – `with 59% of respondents citing it in the most recent edition, ahead of trade policy changes, inflation and domestic political conflict. These concerns have been made tangible in recent weeks, as data centres, commercial air transit hubs, office buildings, energy production facilities, ports and luxury hotels have been hit by drones and missiles. Yet this heightened awareness has not translated into institutional competence. Analysis of Western non-financial firms shows that in seven of nine major industries, multinationals now trail their domestically focused competitors on profitability – and in six of those nine, the gap has widened since the pandemic. Corporations have learned to worry about geopolitics; they have not learned how to navigate it.

The gap between recognition and capability has become especially acute for global multinationals, as firms seek to de-risk not just from US-China divergence, but increasingly from US-EU splits. The ‘Liberation Day’ tariffs of 2025, US sanctions over the EU’s Digital Services Act and Washington’s attempt to obtain Greenland have fundamentally reconfigured a commercial relationship that served as the foundational assumption of Western business strategy for decades. Corporate leadership struggles with this challenge because senior management mostly comprises individuals who built their careers during an extraordinary period when geopolitics rarely intruded upon commerce. That era has concluded, yet many firms remain institutionally unprepared because they have lost the geopolitical muscle necessary to respond.

The Neoliberal Aberration

From 1991 to 2016, the operating assumption of international business was convergence. Markets were liberalising, trade barriers declining and the political alignment of nations was largely irrelevant to investment decisions. Geopolitical risk was conceived as a minor detail, to be hedged through insurance products rather than managed through strategy. Today’s leaders built their careers in this environment, trading political science for economics.

The reversal has been dramatic and difficult for these C-suites to prepare for. In 2016, American multinationals directed just 44% of their capital expenditure to their home market; by 2025, that figure had climbed to 69%. Federal Reserve researchers have found that companies now increasingly invest in countries ideologically aligned with their home nation – with ideological distance, measured by UN voting patterns, significantly shaping FDI allocation.

For today’s executives, this sudden transition may seem shocking. In historical terms, though, it represents a return to norms. For most of the history of international commerce, businesses operating across political boundaries understood that trade was likely to be tumultuous and that active participation in statecraft was inseparable from commercial success. Throughout this history, successful multinational enterprises maintained intelligence capabilities, cultivated relationships with sovereigns and ministers and incorporated alliance structures into strategic decision making. Most importantly, firms actively shaped geopolitics to advance their commercial objectives.

Historical Precedents

The Dutch East India Company (VOC), established in 1602, is perhaps the most evocative and well-known example. The VOC was granted powers approaching those of a sovereign state: the authority to wage war, negotiate treaties, establish colonies and mint currency. By the middle of the seventeenth century, it maintained 150 merchant ships, 50,000 employees and a private army of 10,000 soldiers. Its headquarters at Batavia served as the nerve centre of an extensive intelligence and diplomatic apparatus. When directors in Amsterdam determined that Portuguese competition was commercially intolerable, they dispatched warships. The British East India Company followed a comparable model, ultimately governing the Indian subcontinent with military forces exceeding those of most contemporary European states and an intelligence apparatus with no sovereign state peer.

Corporations with stronger intelligence capabilities than states remained a theme into the nineteenth century, when the British insurance giant Lloyd’s of London established the Lloyd’s Agency to formalise its vast network of spies. This agency, founded a century ahead of the British government’s first formalised intelligence agency, would regularly beat the British admiralty to the punch in reporting geopolitical developments to the Prime Minister, leveraging this knowledge to reach a dizzying high point of underwriting approximately a quarter of all global trade.

The twentieth century offers equally instructive examples. The United Fruit Company, known as El Pulpo for its reach into Central American politics, controlled plantations alongside railways, ports and telegraph networks across Honduras, Guatemala and Costa Rica. When Guatemala's President Árbenz attempted land reform in 1954, United Fruit lobbied the Eisenhower administration to authorise a coup. Similarly, the ‘Seven Sisters’ oil consortium operated with diplomatic reach across the Middle East from the 1920s through the 1970s, jointly determining production quotas and negotiating concessions with sovereign governments. By 1972, the oil giant Aramco alone was spending approximately $5 million a year on political intelligence across the Gulf (equivalent to around $38 million today). Until 1973, this consortium controlled approximately 85% of the world's petroleum reserves, a position maintained through political monitoring and manoeuvring as much as commercial capability.

Muscular Atrophy

The neoliberal era saw major declines in business’ capacity to manage geopolitics. The VOC maintained extensive networks reporting on political developments across Asia; contemporary corporations have largely downgraded this function to generic risk assessments. While most major firms have in-house intelligence teams, few incorporate political intelligence into their strategic positioning. Where historical trading companies cultivated substantive relationships with political authorities, engaging as strategic partners, modern corporations tend toward transactional and reactive lobbying, focusing narrowly on regulatory and taxation considerations to the detriment of truly strategic visions for corporate success.

This erosion extends to how firms think about the future. Shell's scenario methodology, which anticipated the 1973 oil crisis and enabled strategic repositioning before competitors, emerged from recognition that long investment horizons required systematic consideration of geopolitics. While many contemporary firms speak of scenario planning, most treat them as academic rather than as serious inputs to capital allocation. Perhaps most fundamentally, earlier generations accepted that geopolitics imposed limits on pure efficiency, incorporating redundancy into supply chains and maintaining relationships with multiple political patrons. The relentless pursuit of efficiency after the Cold War eliminated these buffers.

Rebuilding Geopolitical Capacity

For modern firms, the historical record suggests several urgent priorities.

First, invest in dedicated intelligence capabilities. This requires analytical teams that understand the political economy of key markets and possess direct access to strategic corporate decision makers. The 2025 European Investment Bank survey found that European companies are investing in supply chain resilience, a response presupposing durable analytical capacity to assess where weaknesses exist and how they may be patched. This analysis must be internal; it inherently cannot exist as the product of external consulting advice given the criticality of institutional knowledge to be meaningful.

Second, elevate government relationships to strategic priority. Historical trading companies cultivated relationships with multiple sovereigns, understanding that exclusive alignment foreclosed options. Recent pivots by American tech hyperscalers offer a contemporary example: faced with European concerns about the US CLOUD Act, Microsoft has established sovereign cloud partnerships under EU jurisdiction, AWS has committed billions to European infrastructure and Google has expanded air-gapped offerings. These represent substantial investments in dual credibility; a modern version of paying homage to competing political authorities.

Third, integrate geopolitical analysis into capital allocation. In an era of restive, shifting geopolitical relationships, long term decisions about commercial activity cannot be treated purely as cost optimisation exercises. Instead, business decisions now simultaneously represent bets on the future of trade and political relationships, industrial policies, wars, resource shortages and global shipping patterns. Shell's scenarios achieved impact because they altered decision makers' mental models before crises materialised. Embedding this kind of thinking throughout corporate leadership is essential to moving away from reactive crisis management to proactive resilient structures.

Fourth, accept that strategic positioning entails costs. The efficiency gains of the post-Cold War era were historically aberrant. The VOC operated with approximately 2% of outbound voyages and 4% of homeward voyages ending in shipwreck; losses absorbed as an operational cost of intercontinental commerce. Global trade has never been frictionless; the neoliberal assumption that it could be was the anomaly. For transatlantic firms, rebuilding resilience may require duplicating capabilities, supply chains and technology stacks. These are genuine costs, with firms reporting that construction of duplicate facilities can cost four to five times more than building in optimal locations. But they constitute insurance against futures no analyst can confidently predict.

Conclusion

The business leaders who constructed global enterprises in earlier centuries would recognise the contemporary environment intimately. They operated in times when commerce, spy-craft and statecraft were intertwined, where political relationships constituted commercial assets and where strategic positioning mattered as much as operational excellence. Their modern successors must now reacquire capabilities their predecessors possessed. The firms that rebuild their geopolitical capacity will navigate divergence between the world's major economic blocs. Those optimising for a world that no longer exists will find themselves instead crushed between great powers, continually reacting to crisis and unable to effectively manage cost and risk in a world with significant downsides of both.

© Colin Reed and Lewis Sage-Passant, 2026, published by RUSI with permission of the authors.

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