The new geopolitical Board imperative: Managing divergence, designing the future
19 January 2026
Geopolitical risk is no longer a backdrop, – it is the operating environment. Global dynamics and trade patterns are being rewritten, AI is advancing faster than regulation can keep pace, climate impacts are disrupting cost structures, and demographic shifts are transforming labour markets and consumer demand. However, the impacts on your business are not yet pre-ordained. Boards can still shape their own future.
One of the most pressing challenges for Boards is escalating regulatory divergence. ESG is the clearest example. The European Union continues to impose detailed sustainability obligations through Corporate Sustainability Reporting Directive (CSRD), supply-chain due diligence rules, and an expanding taxonomy. Simultaneously, parts of the United States are heading in the opposite direction, with legislation limiting the use of environmental and social criteria in investment and procurement decisions. For multinationals, this creates a governance bind: fall short in Europe and face penalties; fall foul of U.S. expectations and risk being uncompetitive, or worse, expose your business to litigation risks and political scrutiny. Boards must therefore adopt a jurisdiction-specific approach whilst still upholding a coherent defensible global sustainability strategy.
Regulatory divergence for emerging technologies complicates the picture further. Let's look at AI – some countries are loosening requirements to encourage innovation, whilst others are tightening rules around safety, data, and security. Sovereign AI is the new hot topic, with substantive investments across the United Kingdom, European Union, Middle East, and the United States. Boards should expect this divergence to persist. Practical steps in mitigation include mapping dependencies across cloud compute and foundation models; identifying geo-political chokepoints; and ensuring AI governance is embedded across risk, compliance, and strategic functions, rather than isolated within legal or IT teams.
Trade and industrial policy shifts – including subsidy inequality, export controls, and protectionism, – require supply chains to be routinely stress-tested. Climate-related disruptions must inform capital allocation and resilience planning, especially where insurance markets or national energy policies are shifting. Demographic trends call for targeted talent scenario planning, and robust workforce composition assessments, to inform longer-term strategies.
Managing geopolitical strategy is, to some extent, an art – balancing uncertainty, competing regulatory expectations, and complex stakeholder pressures. But done well, it can unlock commercial advantages: greater resilience, faster market access, and better positioning in emerging technology and green-economy value chains.
To achieve this, Boards need disciplined geopolitical competence: structured horizon scanning, integrated cross-border legal and compliance frameworks, and clearly set and understood risk tolerances that reflect political as well as financial realities. Boards that embed these capabilities will not only survive instability but also shape the business landscape of the future.
