McKinsey & Company · Nov 21, 2025 –
Planning for “two worlds,” establishing strong external relationships, and building resilient operations are key priorities for executives aiming to capture opportunities while mitigating risks.
When it comes to geopolitics, today’s CEOs are navigating rugged, unpredictable terrain. The imposition of new tariffs, export controls, investment restrictions, industrial policies, or sanctions is disrupting organizations’ direction of travel and business executives’ carefully laid plans. In fact, it is shifting the entire competitive landscape. The CEO’s every decision, whether to push forward, change course, or retreat, must be carefully considered—and then reconsidered.
In McKinsey’s most recent global survey on economic conditions, geopolitical instability outranked macroeconomic volatility, cybersecurity, and even technological disruption as the chief risk to growth. Companies are already feeling the strain and are rerouting supply chains, absorbing higher costs, and confronting tighter talent pipelines.
These shifts aren’t just temporary; they are likely to represent a permanent structural change in the global order. But only one-third of respondents say they are confident in their organizations’ ability to manage trade policy changes. Board directors, too, are often unprepared: According to McKinsey research, most directors say they are ready to deal with challenges close to home but unprepared for major global crises, macroeconomic shocks, and other larger-scale forces that are “too ambiguous to understand fully.”
Modern CEOs—all reliably and technically proficient in finance, operations, engineering, and other traditional areas of business—now need to actively develop their geopolitical IQ. To start, they should recalibrate their corporate strategies to account for two likely but contrasting geopolitical scenarios: a diversified world in which trade is rebalanced but largely open, and a fragmented world in which regionalization dominates and trade restrictions expand.
Regardless of which world emerges, CEOs must use their unique skills, relationships, and opportunities to turn geopolitical uncertainty into competitive advantage—as we explore in this article. Their direct access to various scenarios, nerve centers, market indicators, and other sources of just-in-time business information gives them a platform for establishing and communicating the “house view” on geopolitics. That proprietary foresight can also drive CEOs’ strategic decisions on all the small and large opportunities emerging from a changing world order. It’s the CEO’s input into budgets and allocation decisions that can determine whether organizations have the capabilities and resilience required to address and adapt to geopolitical disruption. And CEOs, of course, continue to play a central role in shaping external narratives—on Main Street, on Wall Street, and increasingly, in the geopolitical realm.
Given the reach and breadth of their expertise, public and private mandates, and global relationships, CEOs will need to get involved in situations and discussions they may not have participated in previously. But there is no avoiding it: CEOs can either help shape the geopolitics around them or be shaped by them.
A period of intense geopolitical uncertainty
Regional conflicts and trade divergences have escalated, challenging multinational corporations everywhere. Since 2017, US–China tariffs have risen sixfold, and global trade interventions have grown 12-fold since 2010. As a result, many companies, particularly in the technology sector, are considering ways to diversify their production. For instance, Samsung may shift part of its smartphone production from Vietnam to India to mitigate prospective US tariffs; about 60 percent of its phones are currently made in Vietnam.
Simultaneously, governments are tightening export controls and regulating investment flows. As a result, industrial policy actions grew by nearly 390 percent between 2017 and 2024, primarily in sectors like defense, semiconductors, and advanced equipment. Over the past few months, there have also been significant (and interdependent) geopolitical shifts in trade and economics and in security (see sidebar, “A closer look at several critical trends”).
Finding calm in the geopolitical storm: An action plan for CEOs
Given the tumultuous geopolitical environment, CEOs will need to stay plugged into current events and use solid scenarios to inform their decision-making. A review of two potential worlds can help leaders find their strategic footing.
- In a diversified world, geopolitical frictions are limited to critical goods and technologies, immigration rules are eased, and investments flow across borders. Bold CEOs can seize opportunities in new trade corridors, talent pools, and industrial incentive programs.
- In a fragmented world, trade restrictions are implemented more broadly, labor mobility narrows, capital flows retreat, and technology transfer slows. In this scenario, CEOs face rising costs, regulatory dissolution, and sharper choices about where—and with whom—to do business.
CEOs can use this “two worlds” framework not just to mitigate risk but also to identify opportunities to create and capture more value. For instance, which businesses will thrive in a diversified world versus a fragmented world? How should CEOs allocate resources to seize new trade opportunities while hedging against restrictions? Additionally, CEOs may need to develop new core capabilities and rethink their organizational design to accommodate both worlds—for instance, making operations more flexible so they can react quickly when opportunities arise or retreat with minimal cost when markets close. Above all, CEOs must do these things quickly while preventing their teams from freezing in place.
Our research and experience point to five cross-cutting imperatives for CEOs seeking to create and sustain business opportunities amid geopolitical disruption:
- build proprietary geopolitical foresight
- capture opportunities and mitigate risks from geopolitical realignment
- take an active role in shaping the external agenda
- build organizational and operational resilience
- transform regulatory change into competitive advantage
Build proprietary geopolitical foresight
Traditionally, CEOs have viewed geopolitics as a risk to be managed, not necessarily a vector of opportunity. But given the steady advance of globalization over the past three decades,6 CEOs must now examine geopolitics through several lenses—strategy, planning, and foresight—and they must establish a clear, company-wide perspective on geopolitics, or the house view.
Doing so can be challenging, however: Geopolitical events unfold quickly, and public data alone is often insufficient for developing a deep corporate perspective. But even when data is incomplete or missing, teams need to act; they cannot simply observe and wait for events to unfold. The CEO will need to orchestrate the development of scenarios, such as the two-worlds framework, that can help teams make decisions while still accounting for potential first-, second-, and third-order effects of actions taken in response to geopolitical shifts. CEOs are uniquely suited to orchestrate this effort, given their direct and privileged access to just-in-time business information as well as the scope and number of relationships they have across the organization.
CEOs in the highest-performing organizations establish dedicated “nerve centers” and cross-functional foresight teams. Standing up a nerve center allows the CEO and leadership team to continually scan the geopolitical environment for general developments that may affect the organization. Pairing that nerve center with the cross-functional foresight team allows the CEO and leadership team to pressure test strategy, capital allocation, and other decisions against the scenarios they have developed. Shell’s scenarios team, for instance, uses energy-transition and trade-flow modeling to develop a perspective on possible geopolitical and economic shifts and embeds those insights into its planning processes. It uses these scenarios to inform major strategic choices and long-term portfolio decisions.
CEOs in high-performing organizations also use advanced analytics to help build the house view. This includes using AI tools to monitor regulatory filings, sanctions listings, and policy changes in real time. These CEOs also treat geopolitical scenarios in the same way they do economic or financial forecasts, considering them all at the same level. For instance, some CEOs in consumer-goods multinationals are now presenting to their boards estimates of how changes in the geopolitical landscape (such as tariffs) could affect their financials, alongside traditional financial projections.
Meanwhile, other CEOs are relying more heavily on market-based indicators that summarize which risks markets are pricing, the triggers to watch, and the assets most exposed. Such tools can help CEOs provide structured input to the board and to strategic-planning and resource-allocation discussions.
In some cases, the CEO may choose to intervene directly to mitigate geopolitical risk. Apple’s CEO, Tim Cook, anticipated increasing trade frictions between the United States and China and decided years ago to diversify from China. He and the leadership team sought new opportunities for the iPhone in India. By fiscal year 2024, roughly 14 percent of iPhones were assembled in India—about $14 billion in output—and the move was integrated into supply risk discussions with the board. This positioning has helped Apple mitigate its exposure to tariffs on US-bound devices and secure policy support under India’s incentives—turning geopolitics into operational advantage.
Capture opportunities and mitigate risks from geopolitical realignment
Geopolitical shifts in trade and economics not only create headwinds but also privileged access for those who act quickly. Once CEOs have institutionalized the practice of achieving geopolitical insight, they can help their organizations identify the biggest opportunities—whether in a diversified or fragmented world.
Specifically, CEOs should ask themselves and their leadership teams: Given what we’ve learned through our scenario planning and scan of the geopolitical landscape, which of our businesses are advantaged in a diversified world, and which in a fragmented one? It’s important to note that while a lot of voices may be involved in allocation decisions and strategy setting, the CEO is the only leader with the mandate to establish or redirect resources toward opportunities resulting from geopolitical disruption.
The CEOs can set the ambition and direction for the company—that is, the three to five strategic moves it will make—and work with teams to allocate capital accordingly, pulling back in some areas, doubling down in others, while remaining committed to long-term bets even during turbulence. Indeed, McKinsey research has shown that companies that adopt a through-cycle mindset and continue to invest in growth even during volatility consistently outperform those that retrench.
With the longer term in mind, the CEO could ask the cross-functional insights team to explore whether a planned factory expansion in, say, Southeast Asia would still be viable if new export controls or tariffs were introduced. The CEO, in turn, could incorporate this foresight directly into board and long-range planning discussions. In this way, the CEO can commit to “no regrets” moves—like supply chain diversification or tariff relief—while retaining the flexibility to pivot as conditions evolve.