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2024 Geostrategic

Outlook

How to thrive amid ongoing

geopolitical complexity

December 2023

1| 2024 Geostrategic Outlook

The world in 2024

The late 2010s and early 2020s have been

characterized by rising geopolitical tensions

and signicant policy shifts in key markets.

Heading into the middle of the decade, the global

environment will remain volatile and unstable.

As executives seek to anticipate and plan for

geopolitical disruptions, two key themes will be

important to keep in mind in 2024.

The rst theme is multipolarity. The geopolitical environment

is increasingly likely to be upended in a variety of geographies

and issue areas. The future of the relationships between the

great powers (the US, EU and China) remains uncertain. Geopolitical

swing states will expand their inuence regarding the topics on the

global agenda and how issues are addressed. Emerging and frontier

markets will be increasingly vocal about what they perceive to be

double standards of Western governments. And smaller actors —

including both governments and non-state actors — are likely to

assert themselves both locally and regionally.

This multipolarity is likely to reinforce existing economic

diversication trends and the importance of supply chain resiliency.

These trends will be driven in large part by heightened competition

between geopolitical blocs or alliance networks. At the same time,

multipolarity will likely continue to create challenges in global

policy coordination, elevating the uncertainty and severity of any

transnational crises that may emerge or expand as the year unfolds.

The second theme is de-risking. Building on trends in recent years,

governments will continue to reengage in or expand their reliance

on industrial policy to promote greater domestic manufacturing

of critical products. This coupling of economic policy with foreign

or national security policies will become more prevalent and overt

in 2024. Governments will seek to reduce global dependencies,

prioritizing national security (broadly dened) over purely economic

considerations when designing and implementing policies.

The extent of de-risking policies and regulations will vary across

sectors, with the greatest focus on products that governments

deem to be strategic. Companies that produce semiconductors,

telecommunications networks, renewable energy technologies,

electric vehicles (EVs) and biotechnologies are among those

that will face more government intervention in their supply

chains and investment decisions. More broadly, these economic

security policies could fuel ination and hinder the global spread

of innovation.

Multipolarity and de-risking will manifest in many ways throughout

the year, with the most visible and impactful areas for business

making our top 10 list of geopolitical developments in 2024.

Most of them will not be wholly new but rather an evolution of

developments from previous years (see Figure 1 on page 3). In fact,

all but one of the top 10 developments in 2023 are expected to

evolve into various aspects of the key developments in 2024.

The top 10 developments in 2024 will also be important signposts in

anticipating how globalization is likely to evolve in the coming

years. In the future of globalization scenarios, EY analysis identied

geopolitical relations and countries’ economic policy stances as

two key strategic uncertainties that will shape the global operating

environment. The multipolar developments are likely to push the

geopolitical environment toward more distinct blocs or networks

of alliances. The de-risking developments point toward greater

nationalist competition in economic policies, at least for strategic

sectors, although in many cases these policies are organized around

trading blocs. The outlook for 2024 is therefore a hardening of the

trend in recent years toward a more fragmented global economy.

22024 Geostrategic Outlook |

Top 10 geopolitical

developments in 2024

Click on each development number to read more.

Strategy

Supply

chain

Sustainability

10 Climate adaptation imperative

8Competition for commodities

9Dual track green policies

7Geopolitics of the oceans

5Prioritizing economic security

6The diversication agenda

4Global elections supercycle

3Domestic challenges in the US and China

1The geopolitical multiverse

2Geopolitics of AI

De-risking

Multipolarity

There are two key themes for the top

10 geopolitical developments in 2024:

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2024GeostrategicOutlookHowtothriveamidongoinggeopoliticalcomplexityDecember2023Theworldin2024Thelate2010sandearly2020shavebeenTheextentofde-riskingpoliciesandregulationswillvaryacrosscharacterizedbyrisinggeopoliticaltensionssectors,withthegreatestfocusonproductsthatgovernmentsandsignificantpolicyshiftsinkeymarkets.deemtobestrategic.Companiesthatproducesemiconductors,Headingintothemiddleofthedecade,theglobaltelecommunicationsnetworks,renewableenergytechnologies,environmentwillremainvolatileandunstable.electricvehicles(EVs)andbiotechnologiesareamongthoseAsexecutivesseektoanticipateandplanforthatwillfacemoregovernmentinterventionintheirsupplygeopoliticaldisruptions,twokeythemeswillbechainsandinvestmentdecisions.Morebroadly,theseeconomicimportanttokeepinmindin2024.securitypoliciescouldfuelinflationandhindertheglobalspreadofinnovation.Thefirstthemeismultipolarity.ThegeopoliticalenvironmentisincreasinglylikelytobeupendedinavarietyofgeographiesMultipolarityandde-riskingwillmanifestinmanywaysthroughoutandissueareas.Thefutureoftherelationshipsbetweenthetheyear,withthemostvisibleandimpactfulareasforbusinessgreatpowers(theUS,EUandChina)remainsuncertain.Geopoliticalmakingourtop10listofgeopoliticaldevelopmentsin2024.swingstateswillexpandtheirinfluenceregardingthetopicsontheMostofthemwillnotbewhollynewbutratheranevolutionofglobalagendaandhowissuesareaddressed.Emergingandfrontierdevelopmentsfrompreviousyears(seeFigure1onpage3).Infact,marketswillbeincreasinglyvocalaboutwhattheyperceivetobeallbutoneofthetop10developmentsin2023areexpectedtodoublestandardsofWesterngovernments.Andsmalleractors—evolveintovariousaspectsofthekeydevelopmentsin2024.includingbothgovernmentsandnon-stateactors—arelikelytoassertthemselvesbothlocallyandregionally.Thetop10developmentsin2024willalsobeimportantsignpostsinanticipatinghowglobalizationislikelytoevolveinthecomingThismultipolarityislikelytoreinforceexistingeconomicyears.Inthefutureofglobalizationscenarios,EYanalysisidentifieddiversificationtrendsandtheimportanceofsupplychainresiliency.geopoliticalrelationsandcountries’economicpolicystancesasThesetrendswillbedriveninlargepartbyheightenedcompetitiontwokeystrategicuncertaintiesthatwillshapetheglobaloperatingbetweengeopoliticalblocsoralliancenetworks.Atthesametime,environment.Themultipolardevelopmentsarelikelytopushthemultipolaritywilllikelycontinuetocreatechallengesinglobalgeopoliticalenvironmenttowardmoredistinctblocsornetworkspolicycoordination,elevatingtheuncertaintyandseverityofanyofalliances.Thede-riskingdevelopmentspointtowardgreatertransnationalcrisesthatmayemergeorexpandastheyearunfolds.nationalistcompetitionineconomicpolicies,atleastforstrategicsectors,althoughinmanycasesthesepoliciesareorganizedaroundThesecondthemeisde-risking.Buildingontrendsinrecentyears,tradingblocs.Theoutlookfor2024isthereforeahardeningofthegovernmentswillcontinuetoreengageinorexpandtheirreliancetrendinrecentyearstowardamorefragmentedglobaleconomy.onindustrialpolicytopromotegreaterdomesticmanufacturingofcriticalproducts.Thiscouplingofeconomicpolicywithforeignornationalsecuritypolicieswillbecomemoreprevalentandovertin2024.Governmentswillseektoreduceglobaldependencies,prioritizingnationalsecurity(broadlydefined)overpurelyeconomicconsiderationswhendesigningandimplementingpolicies.12024GeostrategicOutlookTop10geopoliticaldevelopmentsin2024Clickoneachdevelopmentnumbertoreadmore.1Thegeopoliticalmultiverse2GeopoliticsofAI3DomesticchallengesintheUSandChinaStrategy4GlobalelectionssupercycleSupply5Prioritizingeconomicsecuritychain6Thediversificationagenda7GeopoliticsoftheoceansSustainability8Competitionforcommodities9Dualtrackgreenpolicies10ClimateadaptationimperativeTherearetwokeythemesforthetopMultipolarityDe-risking10geopoliticaldevelopmentsin2024:2024GeostrategicOutlook2Figure1.Manyofthetopgeopoliticaldevelopmentsin2024haveevolvedfromprioryearsTop10geopoliticaldevelopmentsbyyear202220232024MiddlepowersontheglobalstageWarinUkraineThegeopoliticalmultiverseTechnologynationalismintensifiesGeopoliticalswingstatesGeopoliticsofAIEvolvinggreatpowerrelationsHardeningoftechnologyblocsDomesticchallengesintheUSandChinaChina-WesterndecouplingGlobalelectionssupercycleIncreasinginterventioninsupplychainsPrioritizingeconomicsecurityFocusoneconomicself-sufficiencyThediversificationagendaGeopoliticsoftheoceansGreenmineralsresourcenationalismLatinAmerica’sleft-leaninggovernmentsCompetitionforcommoditiesClimatechange-politicalrisknexusMultispeedESGpoliciesDualtrackgreenpoliciesAtwo-tieredworldClimateadaptationimperativeInequalityandthepushforredistributionFoodinsecurityandinstabilityExpansionoftheBrusselseffectEnergysecurityimperativeRiseofcyberpiracyInflation-recessionparadoxNote:indicatesanewdevelopmentfortheyear.Sources:EYGeostrategicOutlooksfor2022,2023and202432024GeostrategicOutlookThrivingamidthecomplexityMultipolarityandde-riskingwillposebothchallengesandopportunitiesforcompaniesaroundtheworld.Eachofthedevelopmentsexploredinthe2024GeostrategicOutlookwillaffectcompaniesinuniquewaysandwillthereforenecessitatespecificgeostrategicactionstocapitalizeontheopportunitiestheypresentwhilealsomitigatingtheriskstheypose.Thetypeandlevelofimpactwilldependonacompany’ssectorandgeographicfootprintandthestrategicchoicesthatitsexecutivesmake.Buttherearethreeno-regretsgeostrategicmovesthatexecutivesacrosssectorsandgeographiesshouldimplementtodevelopamorestrategicapproachtomanagingthetop10geopoliticaldevelopments.BuildgeopoliticalconsiderationsintobusinessAdaptsustainabilitystrategiesmodelsandstrategies.togeopoliticalrealities.Inthiseraofprofoundchangeintheinternationalsystem,theMultipolarityandde-riskingareinfluencinggovernmentimportanceofgeopoliticstocorporatestrategyisatitshighestapproachestopoliciesregardingclimatechangeandnaturallevelinageneration.Successfullyweavinggeopoliticaldynamicsresources,whichwillaffectcompanies’sustainabilityintocorporatestrategywillincreasinglybeacompetitiverequirements,costs,competitiveopportunitiesandstrategy.advantage.Keyactionstoconsiderinclude:Executivesshouldincorporatenewpoliciesandregulations,aswellassignalsforhowsuchpoliciesmayevolveinthefuture,into•Realigningthecompany’sglobalfootprintandcorporatetheirsustainabilitystrategies.Keyactionstoconsiderinclude:strategytofitamorecomplex,multipolargeopoliticallandscape(Thegeopoliticalmultiverse)•Analyzingcurrentandfutureaccesstorenewableenergyandwaterinmarketsaroundtheworld,aswellasthepotential•Developingbusinessmodelsandtechnologystrategiesaroundforpublicattentiontocompanies’waterandenergyusageartificialintelligence(AI)thataccountfordifferentregulatory(Competitionforcommodities)approachesacrossmarkets(GeopoliticsofAI)•Incorporatingpolicy-drivenrisksandopportunitiesinto•FactoringtheinternalchallengesintheUSandChina,aswellassustainabilityagendas,whilestayingaheadoftheregulatorytheirimpactonothercountriesexposedtothesetwomarkets,curvegloballytosatisfythegrowingdemandsofcustomers,intocorporategrowthforecasts(Domesticchallengesinthecitizensandinvestors(Dualtrackgreenpolicies)USandChina)•Exploringopportunitiesforinvestinginnature-basedsolutions•Conductingscenarioanalysistoexplorethepotentialandotheradaptationinitiatives,whilealsoincludingclimateimpactsofmultipleupcomingelectionsworldwidechangeinlocationassessmentsandinvestmentdiligence(Globalelectionssupercycle)(Climateadaptationimperative)Increasetheresilienceofglobalsupplychains.Manycompanies’supplychainsareexposedtogeopoliticaldevelopments.Executivesneedtodeterminehowtheycanbetterpositiontheircompany’soperatingmodelandsupplychainstrategytoproactivelyadjusttoincreasetheirresiliencetogeopoliticaldisruptions.Keyactionstoconsiderinclude:•Assessingwhetherpartsoftheirsupplychainsarestrategictogovernmentsnoworarelikelytobecomestrategicinthefutureandadapttheirsupplychainstrategyaccordingly(Prioritizingeconomicsecurity)•Rethinkingtheircompanies’supplychainstrategiesandpotentiallyexpandingproductioncapacityandsupplierrelationshipsinnewmarkets(Thediversificationagenda)•Creatingbusinesscontinuityandotherresilienceplanstomitigatethepotentialimpactsofmaritimeshippinginsurancerateincreases,shipmentdelays,ordamagedcargosandvessels(Geopoliticsoftheoceans)2024GeostrategicOutlook41.ThegeopoliticalmultiverseTheme:MultipolarityAction:CreategeopoliticallyrobuststrategyMentionsofgeopoliticsandpoliticalriskincompanies’publicAvarietyofsmallercountriesandnon-stateactorsarelikelytodocumentsskyrocketed600%in2022andhaveremainedelevatedincontinuetochallengethestatusquoin2024,whichcouldleadto2023(seefigure2).It’snowonderthatexecutivesarepayingmoremoreviolentconflicts.ThisfollowsAzerbaijan’stakeoverofNagorno-attentiontogeopoliticsinrecentyearsthantheyhadinthepast.InKarabakhandthesurpriseescalationofviolenceintheMiddleEastin2023alone,thewarinUkrainepersisted,theBRICSandtheG202023.Forinstance,theconflictinSudanmayescalate,andtensionswelcomedsignificantnewmembers,JapanandSouthKorearestoredbetweenKosovoandSerbiacouldcontinuetorise.Andnewsecuritybilateraldiplomacy,andviolenceescalatedintheMiddleEast.relationships,suchasthe2023mutualdefensepactbetweenMali,GeopoliticshasbecomeamultiverseofamorecomplicatedmixofNigerandBurkinaFaso,couldemerge.Diplomaticshiftsarealsoalliancesandrivalries,withoverlappingbilateral,regionalandotherlikely,suchasKazakhstanseekingtostrengthencooperationwithitstypesofinstitutionsandgroupings.In2024,thegrowinginfluenceneighborsinCentralAsiaanditsrelationswiththeWest.ofgeopoliticalswingstatesandsmallerplayersseekingtochangethestatusquowillcreateamorecomplexgeopoliticalmultiverse.Thismultiverseofgeopoliticalrelationshipswillalsoplayoutininternationalorganizations.WithBrazilasthe2024hostnation,EvenastensionsamongtheUS,EUandChinacontinuetoinfluencetheG20islikelytoremainfocusedonclimatechange,foodsecurityglobaldynamics,theactionsofgeopoliticalswingstates—countriesandotherissuesofimportancetotheGlobalSouth.ThefirstBRICSthatarenotspecificallyalignedwithanymajorpowerorbloc—willsummitwithitsexpandedmembershipwilloccurinRussia,whichbecomemoreimportantdriversofgeopoliticsin2024.Countriescouldcomplicatemembers’geopoliticalrelationswiththeUSandwithresourcesacrosstheenergyvaluechainarelikelytobeEU.Althoughexpandedmembershipwillmakeconsensusmoreparticularlyinfluential.SaudiArabiaandtheUAEwillplaykeyrolesdifficult,theserelativelysmallgroupingswillremaintheleadinginMiddleEasterngeopolitics—including,importantly,relationsinternationalforumssincecomingtoagreementinlargerforumswithIsrael.TurkeywillcontinueeffortstomediatebetweenUkrainesuchastheUNisbecomingevenmorechallenging.andRussia,aswellasexpandingitsroleintheCaucasusandtheMiddleEast.IndiawillpartnermorewiththeWestonsecurityOverlappingorganizations,groupingsandcreativecoalitionsmatters,whilecontinuingitseconomicrelationshipwithRussia.willemergeondifferentissues.Forinstance,IndiaandChinawillAndBrazilwillseektoelevateLatinAmerica’sroleontheglobalcollaboratetoelevatethestatusoftheBRICSevenasIndiatriestostage,particularlyonenvironmentalissues.reduceitseconomictieswithChinaandtheirborderdisputespersist.AndwhiletheUSandSaudiArabiawillremainsecuritypartners,tensionsbetweenWashingtonandRiyadhaboutglobaloilsupplieswilllikelycontinue.Thisgeopoliticalmultiversewillleadtomorevolatilityindiplomaticandeconomicrelationsintheyearahead.52024GeostrategicOutlookFigure2.CorporateattentiontogeopoliticshaswanedsomewhateventhoughrisksremainelevatedGDP-weightedglobalaverageofpoliticalrisk;mentionsofgeopoliticalriskincompanies’eventtranscripts49.490049.380070049.260049.150040049.030048.920010048.80Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Oct-21Jan-22Apr-22Jul-22Oct-22Jan-23Apr-23Jul-23Oct-23GDP-weightedglobalaverageofpoliticalriskCompanydocumentsmentioninggeopoliticalrisk(leftaxis)(rightaxis)Note:Thetermsincludedinthecountofcompanyeventtranscriptsincludegeopoliticalrisk(s),geopolitical,geopoliticsandpoliticalrisk(s).Thisdataispresentedasarollingthree-monthaverage.Sources:GeoQuant,fromBMI,aFitchSolutionsCompany;Alphasense.Recommendationsforbusiness•Elevatecybersecurityrisksandstrategies.Inthegeopoliticalmultiverse,tensionsarelikelytoplayoutincyberspaceas•Prepareforadynamicsanctionsenvironment.Thewell.These“grayzone”activitiesareattractivebecausetheygeopoliticalmultiverseislikelytoleadtotheUSandEUtotargetdataanddigitalsystems,offeradegreeofanonymityincreasinglyfocusoncompliancewiththeirsanctionsonordeniability,anddonothaveclearconsequencesortermsofRussia,particularlyinthird-partycountries.Andgivenconcernsengagement.Somecompanies—particularlythoseinhighlyaboutIran’sroleintheongoingviolenceintheMiddleEast,strategicsectors—couldbethetargetofstate-sponsoredcybertheUSandothersmaystrengthenenforcementofcurrentattacks.Morebroadly,companiescouldbenegativelyaffectedsanctionsonIranorimposenewones.Thisdynamicsanctionsbyattacksongovernmentsorcriticalinfrastructuresuchasenvironmentcouldfurtherincreasethecostofoilandgaselectricalgrids.Executivesshouldevaluatecybersecurityglobally.Itwillalsocreatecompliancechallengesformanyrisksacrosstheircompany’svaluechainandinvestincybercompanies.Executivesshouldensuretheircomplianceteamsresilience.havesufficientmonitoringandexecutionresourcestoavoidrunningafoulofsanctions.Sectorsdirectlyaffected•Adaptcorporatetreasurystrategies.AstheworldmovesAdvancedmanufacturingandmobilityfromamoreunipolartoamoremultipolarsystem,internationaltransactionsarefollowingsuit.TheshareofUSdollarsinEnergyandresourcescentralbanks’currencyreserveshit59%attheendof2020(itslowestlevelin25years)andhassinceremainednearthatFinancialservicesshareaccordingtotheIMF.TheChineserenminbiisalreadyusedforamajorityofChina’scross-bordertrades,accordingGovernmentandinfrastructuretoNikkeiAsia,andotheremergingmarketsareencouragingtheuseoftheirowncurrenciesaswell.CompaniesneedtotakeHealthsciencesandwellnesstheseevolvingforeignexchangedynamicsintoaccountwhenplanningtheirtreasuryholdingsandmanagingexchangeTechnology,mediaandtelecommunicationsraterisk.2024GeostrategicOutlook62.GeopoliticsofAITheme:MultipolarityAction:CreategeopoliticallyrobuststrategyTheEYCEOOutlookPulsestudyinOctober2023foundthat99%Domestically,governmentsareinadifferentrace—toregulateAIofCEOsareplanningtoinvestinAI.Meanwhile,governmentsbeforethetechnologyoutpacespolicymakers.Ontheonehand,havebeengrapplingwithhowbesttoregulateAIandmaydosogovernmentswanttofosterinnovationtocompetegeopoliticallyindivergentways.In2023,ChinaintroducedseveralAI-specificwhilealsocapturingthepromiseassociatedwithAI,suchasregulations;theG7agreedasetofAIPrinciplesandaCodeofimprovedhealthcareoutcomes,advancementsinnationalConduct;theEUadvancednegotiationsontheAIAct;andthesecurityandenhancedeconomicproductivity.OntheotherUSBidenAdministrationissuedanexecutiveorderonAIsafetyhand,governmentswilltrytodesignAIregulationstoreducetheandsecurity.TechnologicaladvancesinAIhavealsoincreaseditslikelihoodofmacroriskssuchthepotentialforsocialandeconomicimportancetonationalsecurityandgeopoliticalcompetition.IndislocationsasAIperformsmorejobfunctions,increasesinpolitical2024,thedualracestoinnovateandregulateAIwillaccelerateinstabilityduetomisinformationcampaigns,andheightenedtheshifttowarddistinctgeopoliticalblocs.nationalsecurityandcybersecurityrisks.Geopolitically,theraceisontoinnovateandscaleAIwithinAttheinternationallevel,therecentBletchleyDeclarationprovidesdomesticeconomies.TheUSiscurrentlyinthelead,butseveralthebasisforbroad-basedconsensusbuildingoneffortstoensureothercountriesarepoisedtoacceleratetheireffortsindifferentAIistrustworthyandresponsible.Nevertheless,theG7Hiroshimaways(seefigure3).Mostnotably,ChinawillcontinuetoinvestinAIprocesswilllikelyremainanimportantforumforcoordinatingresearchtotrytoachieveself-sufficiencyinAI.TheUKwillkeepregulatoryandtechnologicalapproaches—althoughtheEUwilltakearegulationtoaminimumtotrytofosterinnovationandextenditsmorecomprehensiveapproachthantherestoftheG7,ashighlightedrecentrecordofattractingthethird-mostAIinvestmentglobally.bytheEYAIGlobalRegulatoryLandscapestudy.Incontrast,China’sAIAndSaudiArabiawillcontinuepurchasingcutting-edgetechnologiesecosystemwilllikelyremainadomesticaffair,atleastintheshortterm.todevelopitsAIindustry.TheoutcomeofdualgeopoliticalandregulatoryracesinAIwillAIwillbeanimportantdynamicinUS-Chinarelations.TheUS—betofurtherhardentechnologyblocs,atopdevelopmentinthesometimesincollaborationwithallies—willuseexportcontrolsand2023GeostrategicOutlook.Oneofthekeynear-termarenasofinvestmentrestrictionstolimitChinesecompanies’accesstothecompetitionwillbeaccesstodataforuseinlargelanguagemodelsadvancedsemiconductorsneededashardwareforAIsystems.This(LLMs).WhileAIwillnotreshapetheglobalbalanceofpower“smallyard,highfence”strategywilllikelyleadtoChinalimitinginthenextyear,itwillbecomeanincreasinglyimportantarenaaccesstootherpartsoftheAIvaluechain—includingcriticalofgeopoliticalcompetition.Anditcouldbewieldedasatoolofminerals,someofwhicharealreadysubjecttoexportcontrols.misinformationingeopoliticalrivals’elections.72024GeostrategicOutlookRecommendationsforbusiness•EngageinAItalentplanningandtraining.Aswithanysignificanttechnologicalchange,AIwillcreatehumancapital•Strengthencross-borderdataandtechnologygovernance.opportunitiesandchallenges—thepotentialdownsidesofTheAIPrinciples,adoptedbytheOrganizationforEconomicwhichpolicymakersareconcernedaboutataneconomy-wideCooperationandDevelopment(OECD)andG20in2019,scale.ExecutivesshouldengagewithpolicymakersonthisissueandtherecentBletchleyDeclaration,willcontinuetoservetoidentifysharedsolutions.Companiesalsoneedtomanageasguidelinesforgovernments.ButgloballyinteroperablethischangethroughcommunicatingmoreeffectivelywiththeirregulationsonAIwillnotbedevelopedin2024.ThiswillemployeesabouttheplannedbusinessapplicationsofAIandcomplicatedatamanagement,AIimplementationandinvestingintrainingforcurrenttalent.TheEYWorkReimaginedregulatorycompliance.Executivesneedtounderstandthe2023studyfoundthereiscurrentlyadisconnectonthisissue,coreprinciplesunderlyingAIrules—andhowtheyinteractasonly49%ofemployeesalreadyareorexpecttobeusingwithexistingregulations.AsEYteamshavepreviouslyGenAIinthenext12months,comparedto84%ofemployers.suggested,companiesshouldestablishrobustAIgovernanceframeworkstobothensurecompliancewithexistingregulationsSectorsdirectlyaffectedandtobuildconfidenceamongregulatorsandotherstakeholdersintheirAIapplications.FinancialservicesGovernmentandinfrastructure•IdentifyopportunitiestotestandscaleAI.ManyHealthsciencesandwellnessgovernmentsareseekinggreaterAIinvestmentandPrivateequityinnovationintheireconomies.AndsomegovernmentswillTechnology,mediaandtelecommunicationsestablishnew“regulatorysandboxes”toenablecompaniestotestnewAIapplicationsinacontrolledenvironment.25kAccordingtoEYresearch,only8%oforganizationsarecurrentlyusingAItodriveinnovation,while91%areusingAIprimarilytooptimizeoperations,developself-servicetoolslikechatbots,orautomateprocesses.ThisgapprovidesastrategicopportunityforcompaniestouseAItoinnovateonproductsandbusinessmodels,particularlyinmarketsinwhichregulatorsencouragesuchactivities.20kFigure3.TheracetofundanddevelopAIsystemsishighlycompetitiveandgeopoliticallysignificantSelectAIindustryindicatorsbycountry25kNote:Thesi1ze5okfthebubblerepresentsthetotalfunding(publicandprivate)forAI.ManyothercountrieshaveAIcapabilities.Onlythe10leadingcountriesacrossthesethreeindicatorsareshown.Numberofsignificant20kSource:TortoiseGlobalIAIndex,https://www.tortoisemedia.com/machinelearningsystemsdevelopedintelligence/global-ai/#data10kUS15kIndiaIsrael10kGermany5k5kCanadaUK0k0k00China5010015050100150200250300FranceSouthKoreaSaudiArabiaNumberofAIcompanies2024GeostrategicOutlook83.DomesticchallengesintheUSandChinaTheme:MultipolarityAction:CreategeopoliticallyrobuststrategyFordifferentreasons,theworld’stwolargesteconomiesarefacingChinawillfaceadifferentchallenge,stemmingfromwhethersignificantdomesticchallenges.IntheUS,politicalpolarizationistheofficialpolicymixwilleffectivelyaddressanyfinancialandchallengingbasicgovernancefunctions,includingdebtmanagementmacroeconomicweaknessesthatarise.Thecyclicalchallengesintheandpassingabudget,whichledtoadowngradeinitssovereigndebtrealestatemarketandhighmunicipalgovernmentdebtlevelswillratingin2023.InChina,thechallengesstemfrommacroeconomicslikelypersist.Inresponse,policymakerswilllikelyintroduceperiodic,andassociatedpolicymaking.ThesechallengesinChinaandthetargetedactionstoreducetheriskoffinancialcrisis.PolicymakersUSwillcontinuetoheightenpoliticalriskswithineachmarketmayalsointroduceadditionalincrementalreductionsinbanks’reserveandcouldhaveknock-oneffectsforgeopoliticsandglobalrequirementratiosandtargetedmeasurestosupporttheexportgrowthin2024.sector,amidcyclicalweaknessassociatedwithlowerglobaldemand.IntheUS,the2024electionwillheightensocietaltensionsandChinesepolicymakerswillalsofaceastructuralchallengeassociatedpolicyuncertainty.AsplitincontroloftheHouseandSenate,withadaptinghouseholdandbusinessexpectationstoanewgrowthcoupledwithnarrowmajoritiesinbothchambers,meansCongressenvironment.Chinahastransitionedfromaverageannualeconomicwilllikelyfacechallengesinpassingnecessarylegislation.Andgrowthof7.7%duringthedecadeleadinguptotheCOVID-19thepartisandivideinAmericans’trustindifferentnewssources,pandemictoaneconomythatgrowsaround5%peryear(theasanalyzedbyYouGov,raisestheriskthatsomesegmentsoftheofficialtargetfor2023).Beijingwillcontinuetoprioritizenationalpopulationcouldquestionthelegitimacyoftheelection—whichsecurityanddomesticstabilityovereconomicgrowth,withpoliceswouldperpetuatepolicymakingchallenges.toacceleratethedevelopmentofdomesticadvancedmanufacturingcapabilities,particularlyinstrategictechnologies.Legislativestasisatthefederallevelmeanstheadministrationwilldriveitsprioritiesthroughtheexecutivebranch,andindividualDomestically,2024willlikelybeaninflectionpointforbothcountries.stateswillcontinuetoenactdivergentlawsandregulationstoHowtheserisksevolvewillhavesignificantimplicationsfortheiraddressemergingissuesoradvanceparticularpoliticalagendas.medium-termtrajectoriesandfortheglobaleconomy(seefigure4).Thisphenomenonwilloccuratbothendsofthepoliticalspectrum—Andgeopolitically,althoughtheirbilateralmeetingonthesidelinesofincluding,forinstance,Republican-ledstatespushingbackontheAsiaPacificEconomicCooperation(APEC)summitinNovemberESGinvestmentsandDemocratic-ledstatesimplementingstricter2023mayestablishafloor,theUS-Chinarelationshipcouldsufferasenvironmentalrules.RegulatoryfragmentationisalsolikelyonAIWashingtonandBeijingfocusontacklingdomesticchallengesandandhealthcareissues.respondingtodomesticpressures.HowUS-Chinarelationsevolvewillaffectglobalgeopoliticalandeconomicdynamics.92024GeostrategicOutlookRecommendationsforbusiness•Consideradjustingriskstrategies.Thetwolargesteconomiesintheworldarefacingsomeuncertaintyintheiroutlooks,•Planforuncertainsalesandrevenueforecasts.whichcouldhavebusinessimplicationsforcompaniesacrossCompanies’short-termglobalsalesandrevenueforecastssectorsinthenearandmediumterms.CompaniesshouldwillbeconsiderablymorechallenginggiventheeconomicprioritizetheirmonitoringcapabilitiesforpoliticalanduncertaintiesintheUSandChina.Andgiventhesystemiceconomicrisksinthesemarketsandconsideropportunitiesroleofthesetwomarketsintheglobaleconomy,forecastingassociatedwithnewriskmitigationactivities.challengeswilllikelyaffectmanyothermarketsaswell.DownsiderisksinbothmarketscouldleadtoweakerglobalSectorsdirectlyaffectedeconomicperformancethanexpected.Giventhehighlyfluidnatureoftheserisks,executivesshouldconsiderutilizingAdvancedmanufacturingandmobilityscenarioplanningforbothshort-termandmedium-termConsumerproductsandretailforecastingefforts.GovernmentandinfrastructureHealthsciencesandwellness•Elevatecomplianceandreputationalissues.TheregulatoryTechnology,mediaandtelecommunicationsenvironmentsbetweenChinaandtheUSwilllikelycontinuetodiverge,particularlyregardingdataanddigitaltechnologies.AddingtothecomplexityistheincreasingregulatorydivergencesamongUSstates.Bothtrendsarelikelytoraisecompliancecosts—and,insomecases,reputationalissues—forcompaniesoperatingacrossdifferentbordersinavarietyofsectors.Companiesshoulddeterminewhethertheircompliancecapabilitiesarerobustenoughforthisenvironment.Andexecutivesshouldconsidercompliancedynamicswhenmakingstrategicdecisions.Figure4.ChinaandtheUScombinedrepresentabouthalfofsomeglobaleconomicactivitiesShareofChinaandUSintheworld,selectedindicators26%16%17%36%57%GDPManufacturing47%Stockmarket43%54%valueaddedcapitalizationPatents17%11%filed31%47%Key:ChinaRestofworldUSNote:Thedataarethelatestavailableindicators,asofOctober2023.GDPismeasuredinUSdollarsatmarketexchangerates.Sources:InternationalMonetaryFund,WorldBank,WorldFederationofExchanges,WorldIntellectualPropertyOrganization.2024GeostrategicOutlook104.GlobalelectionssupercycleTheme:De-riskingAction:CreategeopoliticallyrobuststrategyAwaveofelectionsingeopoliticallysignificantmarketsrepresentingInEurope,thecitizensofthe27EUmemberstateswillvoteinJuneabout54%oftheglobalpopulationandnearly60%ofglobalGDPEuropeanParliamentelections.TheoutcomewillimpactEUpolicieswilloccurin2024(seefigure5).Theseelectionswillbeheldamidforclimateregulationandmigration,supportforUkraine,anditsalreadyheightenedmistrustingovernments,asdocumentedbytheChina“de-risking”strategy.TheUKislikelytoholdparliamentaryEdelmanTrustBarometer.Suchdynamics,combinedwithnationalistelections(duebyJanuary2025),whichmayaffectpost-Brexitandpopulisttrendsandpolarizingissues,increasetheriskofsocialtradematters,energytransitionpoliciesandtaxation.BothUkraineunrestsurroundingelections.ThisglobalelectionssupercycleandRussiaarescheduledtoholdpresidentialelectionsin2024,willgenerateregulatoryandpolicyuncertainty,withlong-termalthoughtheongoingwarmaycausedelaysorirregularities.implicationsforindustrialstrategies,climatepoliciesandongoingmilitaryconflicts.AndinAfrica,SouthAfricanswillvoteingeneralelectionsinthesecondquarter,amidlongstandingconcernsovercorruption,ThebiggestelectionwillbeinIndiainMayandJune,whencitizenseconomicopportunitiesandinfrastructurechallenges.Senegal,representing1.4billionpeoplewillvote.PrimeMinisterNarendraRwanda,Mozambique,Botswana,GhanaandSouthSudanareamongModi’sBharatiyaJanataParty(BJP)willfaceanewoppositiontheotherAfricancountrieswithelectionsscheduled—manyofwhichallianceofmorethan20parties.Theelectiondebatesarelikelytoarelikelytobecloselywatchedforindicationsofregionalstability.revolvearoundeconomicpoliciesandnationalistattitudes.WhetherthenextgovernmenthasamajorityinparliamentwilldeterminetheIntheAmericas,MexicanvoterswilldecidebetweentherulingMorenaspeedandscopeofpoliciessupportingIndia’sinfrastructureandpartyandtheoppositionalliance,FrenteAmplioporMéxico(FAM),inmanufacturingsectors.June.Thenextgovernmentwillimpactthedirectionofthecountry’senergypoliciesandinfluenceforeigninvestmentattractivenessamidElsewhereinAsia,theoutcomeofTaiwan’sJanuarypresidentialnearshoringandfriendshoringtrends.AndinVenezuela,theextentelectionwillaffecteconomicandpoliticalrelationswithMainlandtowhichoppositioncandidatesareabletoparticipateinitsMayChinaandbroadergeopoliticaldynamics.Indonesia’selectionspresidentialelectionwillimpactitsdiplomaticandcommercialrelations.inFebruaryhaveheightenedglobalsignificancegivenitsroleinthecriticalmineralssupplychain.AndSouthKorea’slegislativeInNovember,theUSwillholdoneofthelastelectionsofthe2024electionswilldeterminewhetherPresidentYoonSukYeolwillhaveglobalelectionssupercycle.Campaigndynamicscouldexacerbategreaterabilitytosecurelabormarketandregulatoryreforms.analreadypolarizedelectorateandincreasevolatilityforbusinessesduringtheelectioncycle.Theoutcomeoftheelectionscouldleadtofar-reachingshiftsondomesticandforeignpolicyissues,includingonclimatechange,regulationsandglobalalliances.112024GeostrategicOutlookRecommendationsforbusiness•Incorporateelectionsinclimateandsustainabilitystrategies.Climatepolicyandregulatoryuncertaintyis•Conductscenarioplanningforelectionandpolicyoutcomes.inherentinanumberofthe2024elections.AnysuchThecombinedeffectofthisglobalelectionssupercyclewillchanges—towardeithermoreorlessambitiousemissionsbeanunprecedentedlevelofelectoral,policyandregulatoryreductions—wouldlikelyhavemeaningfulimpactsonbusinessuncertainty.Theglobalelectionssupercyclealsoposeselevatedoperations,finance,complianceandstrategyforcompaniessociopoliticalandsecurityrisksassociatedwithprotests,acrossmultiplesectors.Companiesshouldmonitorthewhichhavethepotentialtodisruptbusinessoperationspotentialoutcomesandstakeholderinterestsinkeymarketsandcreatereputationalrisksinsomemarkets.Successfullyandpreparetoassessclimatestrategiesoncethepost-electionsnavigatingthesedynamicsrequiresscenarioanalysis,outlookbecomesclear.whichistheidentificationofmultipleplausibleoutcomesandassessingtheirbusinessimplicationsfromrevenueSectorsdirectlyaffectedtooperations.Oncepotentialscenariosareidentifiedandexposuresareunderstood,executivescanadjuststrategyandEnergyandresourcesriskmanagementactivitiestocaptureidentifiedopportunitiesandlimitdownsiderisks.Governmentandinfrastructure•Assesssalesandgrowthimplicationsofeconomicpolicies.Technology,mediaandtelecommunicationsThepolitical,economicandbusinessenvironmentswillbemorevolatileasaresultofthe2024globalelectionssupercycle.Heightenedvoterconcernsaboutinflationandeconomicgrowthmeanmanynewgovernmentsarelikelytohaveeconomicpolicyatthetopoftheiragendas.Shiftsintaxpolicycouldoccur.Othernewpoliciesmaycreatesalesandgrowthopportunities,butsuchpoliciesarelikelytobeframedwithineconomicsecurityobjectives(seedevelopment#5),andsosomeopportunitiesmaybelimitedtocompaniesfromagovernment’sdomesticmarketanditsallies.Executivesshouldassesshownewgovernments’policieswillaffectopportunitiesandchallengesintheirsector.Figure5.Jurisdictionswithelectionsin2024accountformorethanhalfofglobalGDPandpopulationSharesofglobalGDPandpopulationofjurisdictionswithelectionsin2024,byregion27%7%Key:Americas60%28%AsiaPacific8%EuropeandEurasia54%MiddleEastandAfrica22%8%10%9%ShareofglobalGDPShareofglobalpopulationNote:Thesefiguresincludejurisdictionsforwhichelectionsareplannedfor2024butnodatehasyetbeenset.Sources:WorldBank,InternationalFoundationforElectoralSystems.2024GeostrategicOutlook125.PrioritizingeconomicsecurityTheme:De-riskingAction:IncreasesupplychainresilienceGlobaldevelopmentsinrecentyearshavehighlightedThesesectorswillfacestringenteconomicsecuritypolicies,includinginterdependenciesamonggeopoliticalrivals,leadingtoariseinexportcontrols,entitylistsandinvestmentscreening.In2024,theneo-statism,increasinginterventioninsupplychainsandafocusonEUwillseektoexpandandharmonizeexportcontrolsfordual-economicself-sufficiency.In2023,thesetrendsgainedmomentumusetechnologiesandtheUSwillintroduceoutboundinvestmentwiththeUSExecutiveOrderproposingoutboundinvestmentscreeningandcouldexpandexportcontrolsonChina.restrictions,China’sForeignRelationsLawandtheEU’seconomicsecuritystrategy.AccordingtoGlobalTradeAlert,thenumberoftradeIntraditionalstrategicsectors,suchascriticalinfrastructureinterventionshasincreasedbynearly180%inthepastfiveyears,andenergy,governmentswillemployacombinationofcontrolswithalmostfourtimesmoreharmfulinterventionsthanliberalizingandincentivestopromoteorprotectdomesticproductionwhileones.In2024,economicsecuritymeasuresto“de-risk”globalforgingnewpartnershipstosecuresupplychains.De-riskingintheinterdependencieswillbeaprimetoolingeostrategiccompetition.energysectorwillcontinuetofocusonenergytransitioninputsandtechnologies,includingcriticalminerals,high-capacitybatteriesEconomicsecuritypolicieswillbemotivatedbythreeobjectives:andelectricvehicles(EVs).Continuedimplementationofeconomicreducingrelianceongeopoliticalcompetitors,promotingdomesticsecuritypoliciesinthissectorwilllikelyincreasethealmost70%ofindustrycompetitivenessandsupportingdomesticsociopoliticalChineseandmorethan50%ofUSexportsoflowcarbontechnologiesstability.Whilegovernmentsofmostlargeeconomieswillpursuethesecoveredbyexportcontrolsin2023,accordingtotheG20Tradeobjectives,thetacticswillvary,includingtradeandindustrialpoliciesPolicyFactbook.TheEU’santi-subsidyinvestigationintoEVsimportedandgrayzoneeconomiccoercion(i.e.,informalrestrictivemeasuresfromChinawillproceedandwilllikelyleadtoaresponsefromBeijing.usedagainstforeigncompanies).TheG7countriesandChinawillInaddition,China,Indonesiaandothersmayexpandexportcontrolscontinuetocreatethelegalfoundationsoftheireconomicsecurityoncriticalmineralsorsolarpanels.policytoolboxes,includinginvestmentscreening,exportcontrolsandanti-coercionmeasures(seefigure6).MiddlepowerssuchasIndiaAndfinally,governmentswillincreasinglyfocusonemergingandIndonesiawillprimarilyrelyonindustrialpolicy.strategicsectorsin2024,includinghealthcareandagricultureandfood.PolicieswillaimtoenhanceresiliencetosupplychainThemoreasectorisviewedas“strategic”bythegovernment,thedisruptions.Forinstance,Indiawilldoubledownonitsproductionmoreeconomicsecuritypolicieswillimpactthatsectoranditssupplylinkedincentiveschemeforactivepharmaceuticalingredients(API),chains.HighlystrategicsectorsincludeaerospaceanddefenseandtheEU’spharmaceuticalreformcouldmandatemonitoringandadvanceddigitaltechnologiesanddata,especiallydual-useofsupplychainsandstockpiles.AndChinawilllikelytakefurthertechnologiessuchassemiconductors,AIandquantumcomputing.measurestoenhanceitsfoodsecurity.132024GeostrategicOutlookFigure6.EconomicsecuritypoliciesarewidespreadandarecontinuingtoexpandOfficialpolicymeasuresrelatedtoeconomicsecurity,selectjurisdictionsChinaEUUSJapanExportcontrols(1)Tariffs(1)InboundFDIscreeningOutboundFDIscreeningAnti-coercionpolicyDatasovereigntymeasuresSanctionsoneconomicsecuritygroundsSubsidiesandtaxcreditsLocalcontentrequirements(2)PublicprocurementrestrictionsDedicatedministry/functionImplementedforhighlyandtraditionalstrategicsectorsPoliticaldiscussiontointroduceorexpandmeasuresImplementedforhighlyortraditionalstrategicsectorsNoneNotes:1)Trademeasurestargetinggoodsandsectorsconsideredstrategicinthecontextofeconomicsecurity;2)requirementsusedasaconditiontoaccesssubsidiesandtaxcreditsSource:EYGeostrategicBusinessGroupanalysisRecommendationsforbusiness•Identifyinvestmentopportunitiesinstrategicsectors.Governmentswillimplementindustrialpoliciestoincentivize•Prepareforsupplychaindisruptionsandhighercosts.ormandatelocalresearch,developmentandproductioninEconomicsecuritypoliciesarelikelytoaffectwherecompanies,strategicsectors.Thistrendwillbewidespread,includinginparticularlyinstrategicsectors,canlocatetheiroperationsgeopoliticalswingstatessuchasBrazil,IndiaandIndonesia.andsupplychains.PoliciesarelikelytocontinuetoinduceCompanieswillhaveanopportunitytotakeadvantageofcompaniestoreorientpartsoftheirsupplychainsandrelatedtaxbreaks,subsidiesandstate-guaranteedinvestments.reassesstheirpresenceincertainmarkets,whichcouldleadtoExecutivesshouldidentifyandassessopportunitiesassociatedhighercostsandreducedrevenues.Thesepoliciescouldalsowiththeseenablingpolicies—whiletakingintoaccountcomplicateaccesstotechnologyandtalent,especiallyinhighlygeopoliticaldynamicsandallianceswhenassessingtheviabilitystrategicsectors.Companieswillneedadetailedunderstandingofenteringorexpandinginparticularmarkets.oftheirvaluechainandwhereeconomicsecurityriskscouldarise.ExecutivesshouldassesswhetherpartsoftheirsupplySectorsdirectlyaffectedchainsareconsideredtobestrategicandadapttheirsupplychainstrategyaccordingly.Advancedmanufacturingandmobility•AnticipategeopoliticalimpactsonmergersandacquisitionsEnergyandresources(M&A).Economicsecuritypolicieswillcontinuetoaffecttheviabilityofcross-bordertransactions,whichcouldbedirectlyFinancialservicesimpactedbygovernmentpolicies,tit-for-tatpoliticaldecisionsorinformalrestrictionsagainstcertaincompanies.InboundandGovernmentandinfrastructureoutboundinvestmentscreeningmeasureswillbeparticularlyimpactfulforM&Astrategies.ExecutivesshouldassesstheHealthsciencesandwellnessgeopoliticalrelationshipbetweencountriesinwhichtheyoperateandwhethertheirplannedM&AtouchesnationalPrivateequitysecurityconcernsinordertoanticipatepotentialregulatorydelayorrejectionoftransactions.Technology,mediaandtelecommunications2024GeostrategicOutlook146.ThediversificationagendaTheme:De-riskingAction:IncreasesupplychainresilienceIntheJuly2023EYCEOOutlookPulsesurvey,99%ofCEOssaidincentiveswillalsobeusedtoadvancegovernments’owntheyplantoreconfiguresupplychains,relocateoperationalassetsinvestmentpriorities,suchasinMoroccoandMexico.andmakeotherstrategicchangesinresponsetogeopoliticalchallenges.ThesechallengesincludetensionsbetweengovernmentsOnthedownside,transportationinfrastructure,accesstoelectricityinkeymarketsandgovernmentpoliciesthatmandateorincentivizeandtalentdynamicscouldposerisks.Forexample,infrastructurediversifyingvaluechainlocations,includingthroughonshoring,qualityinmanySoutheastAsiancountriesisfarbelowthatnearshoringandfriendshoring.ThisvaluechaindiversificationofChina’s,accordingtotheEconomistIntelligenceUnit.Andwillposebothupsideanddownsidepoliticalrisksin2024forInternationalLaborOrganizationdatashowsthatonly22%ofIndia’scompaniesenteringorexpandinginalternativemarkets.laborforcehasanadvanceddegree,comparedto37%inChina.ConsistentlylowunemploymentcouldalsomakeacquiringtalentHeightenedlevelsofgeopoliticalriskwillremainoneoftheprimaryincreasinglychallenginginMexico,Poland,Vietnamandelsewhere.driversofdiversificationin2024.WhileinvestmentwillcontinuetoAndthe“higherforlonger”globalinterestrateenvironmentcouldflowtodevelopedmarkets—thetoptworecipientsofforeigndirectheightengovernmentfinancingandeconomicrisksinsomemarkets.investment(FDI)inEuropein2022wereFranceandtheUK,forexample—thegeopoliticalswingstatesthatmaintaineconomicandSustainabilitywillhaveamoremixedimpactonthediversificationgeopoliticalrelationswithallmajorpowersarelikelytobecentraltoagenda,giventhetrendtowardcarbontaxesandemissionsreportingthediversificationagenda.Forexample,thevalueofFDIinIndiaandrequirements.IncentivesfromtheUSInflationReductionActandIndonesiajumpedin2022(seefigure7).VietnamwilllikelycontinueEUGreenDealwillprovidecompanieswithnewopportunitiesacrosstoattractmanufacturinginvestment.Mexico,whichbecamethegreenindustriesinthesemarkets.Morebroadly,shiftingsupplychainsUS’slargesttradingpartnerin2023,willremainakeynearshoringclosertoendconsumerscouldreduceemissionsthroughshorterinvestmentdestinationfortheUSmarket.Asdiversificationcontinues,transportnetworks.However,thelackofrenewableenergyinsomeothermarkets—suchasTurkey,CostaRicaandMorocco—couldgeographiescouldheightensustainabilitycostsandrisks.Forinstance,attractmoreinvestmentaswell.lessthan15%oftheenergysupplyinMexicoandPolandcomesfromrenewableenergy,accordingtotheInternationalEnergyAgency.Avarietyofcountry-levelpoliticalriskswillinfluencethediversificationagenda.Ontheupside,governmentincentivesThe2024electionssupercyclewillraisethelevelofpolicyuncertaintywilldrivesomediversificationdecisions.India’sproduction-linkedinavarietyofmarkets.InIndia,whetherthegovernmentwillrelaxincentivesandimportlicenserequirementswilllikelyinducemorelaborlaws,advanceinfrastructureinvestmentandreformlandmanufacturinginvestments,includinginsemiconductors.Newacquisitionremainkeyquestions.Indonesia’snextgovernmentmayeconomicsecurityincentivesinJapanwillalsodrawininvestmentschangepoliciesaffectingthecountry’scriticalmineralsindustry.foradvancedtechnologiesanddomesticmanufacturing.TaxEnergypolicywillbeakeyagendaitemforMexico’snextpresident.152024GeostrategicOutlookRecommendationsforbusiness•Monitorawidearrayofmarketsforgrowthopportunities.Governmentincentivesrelatedtoadvancedmanufacturing,•Reassessglobalsupplychainstrategies.Realigningandtechnologyandtheenergytransitionwillcreateinvestmentdiversifyingsupplychainswillrequireassessingbothglobalopportunitiesforcompaniesinmanymarketsaroundtheandlocalpoliticalrisks,aswellasdeterminingwhethertoworld.Inmanycases,theseinvestmentswillbeaccompaniedverticallyintegratemanufacturingversusexpandsupplierbyinfrastructure,logisticsandotherservicesevolvingtomeetecosystems.Forexample,companiesshouldreassesstheirthedemandsofnewmanufacturingfootprints.Allofthiswillsourcingandsupplychainstrategies,includingwaystogainhavepositivespillovereffectsforconsumerspendingandgreatercontrolandaccesstocriticalrawmaterialsandmacroeconomicgrowth.Executivesacrossallsectorsshouldlocalizingsupplychainswherepossibletoalignwithgrowingrefreshtheircorporateandgrowthstrategiestoaccountforsustainabilityobjectives.Infact,atopdeterminantofchoosingthesechangesandseektocaptureemergingopportunities.amarketinwhichtoinvestispolicyapproachestoclimatechangeandsustainability,accordingtothe2023EYEuropeSectorsdirectlyaffectedAttractivenessSurvey.CompaniesshouldalsoassesstheircurrentcapabilitiestooverseemorecomplexsupplychainsAdvancedmanufacturingandmobilityandevaluatewhetherfurtherinvestmentsinthecompliancefunctionareneeded.Consumerproductsandretail•EvaluateandrationalizepoliticalriskprofilesbeforeEnergyandresourcesdiversifying.Companies’diversificationagendaswillincludemarketentryandinvestmentdecisionsthatwillchangetheirFinancialservicespoliticalriskprofiles.Boardsandmanagementmayhavelittleexperienceinnewmarkets,socompaniesshouldadoptrobustGovernmentandinfrastructureprocedurestoevaluatenewmarkets,includinggeopoliticaldynamics,domesticpoliticalstabilityandregulatorytrends.HealthsciencesandwellnessSuchprocessesshouldincludeanalyzingnewpoliticalriskstowhichthecompanywouldbeexposed,thepolicyincentivesthecompanywouldbeabletoaccessifitenteredorexpandedinthemarket,andhowsuchdecisionswouldchangethecompanies’overallpoliticalriskexposure.Figure7.AvarietyofdiversificationmarketsarebeginningtoattractsignificantgreenfieldinvestmentsValueofannouncedgreenfieldFDIprojects,bydestination(billionsofUSdollars)8060402002014201520162017201820192020202120222013VietnamIndiaMexicoArgentinaMoroccoIndonesiaSource:UnitedNationsConferenceonTradeandDevelopment(UNCTAD).2024GeostrategicOutlook167.GeopoliticsoftheoceansTheme:MultipolarityAction:IncreasesupplychainresilienceAbouthalfoftheworld’spopulationliveswithin100milesofthethatdeepseaminingcouldaccountfor35–45%ofcriticalmineralssea,atleast95%ofglobaldataflowsthroughunderseacables,suppliesby2065.TheInternationalSeabedAuthoritywillaccelerateandone-thirdofenergyproductionisoffshore.Recentevents—effortsunderwaysince2014toestablishexploitationregulationsincludingthedestructionoftheNordStream2pipelineandmorefordeepseamining.Butwith64%oftheoceanfloorlocatedbeyondfrequentfreedomofnavigationexercises—havehighlightedgrowingnationaljurisdictions,geopoliticalcompetitiontosecureaccesstogeopoliticaltensions.Competitionovercontrolofandaccesstotheseresourceswillgrow.theworld’soceanswillintensifyin2024,withimplicationsforsupplychains,dataflows,foodsuppliesandenergysecurity.Similarly,thedwindlingoffishstockscouldleadtoheightenedinternationaltensions.TheFoodandAgriculturalOrganizationTheriskofgeopoliticaldisruptiontoocean-basedtransportationreportsthatthepercentageofstocksfishedatbiologicallywillgrowin2024,accordingtoarecentassessmentoftheworld’sunsustainablelevelsrosefromjust10%in1970to35%in2019.11busiestmaritimechokepoints(anestimated$7.4trillionintradeStrongereffortstocombatillegal,unreportedandunregulated(IUU)isatriskofsupplychaindisruptionsinEastAsiaalone).Ongoingfishingwillincreasethefrequencyofat-seaincidentsbetweenfishingmilitaryactionsintheBlackSea,increasednavalandairoperationsfleetsandnaviesorcoastguards.Morethan175countriesarealsoinandaroundtheSouthChinaSea,andthepossibilityofmorenegotiatingabindingagreementtolimitglobalplasticpollution—significantnavalclashesinthePersianGulfhavealreadyraisedwhichaffectsmorethan800marineandcoastalspecies—in2024.maritimeinsuranceratesandhavethepotentialtodisruptcriticalinternationalshippinglanes(seefigure8).TheArcticOceanwillbeanarenainwhichallofthesetrendsconvergeasawarmingclimateexpandsaccesstothearea.GeopoliticalConcernwillalsogrowaboutthevulnerabilityofunderwatertensionswillcontinuetoextendintotheArctic,suchaswhensevencommunicationsinfrastructure.TeleGeographyestimatestherearemembersoftheArcticCouncilsuspendedtheirparticipationintheabout550activeandplannedsubmarinecablesglobally,stretchingorganizationinthewakeofRussia’sinvasionofUkraine.about870,000miles.Newcableconstructioningeopoliticallysensitiveareas,suchastheAsiaLinkCableconnectingSoutheastGovernmentshavetypicallydealtwithmaritimeissuesinapiecemealAsiaandChina,couldincreasinglybeatriskofgeopoliticallyfashion.Giventhepotentialforgreatergeopoliticalconflict,governmentsmotivatedcyberorphysicalattacks.arelikelytoexploremoreintegratedstrategiesthataddressallrelatedissues.ButdespitetheprogressinagreeingtheUnitedNationsHighTheenergytransitionwillaccelerateinterestinseabedminingofSeasTreatyin2023,heightenedgeopoliticaltensionswillchallengecriticalminerals.ScientistsattheUSGeologicalSurveyestimatemultilateraleffortstoregulatetheoceaneconomyin2024.172024GeostrategicOutlookFigure8.Maritimeinsurancepremiumscontinuetorise,inpartduetogeopoliticalriskMaritimeinsurancepremiumsbyregion(billionsofUSdollars)40201420152016201720182019202020212022353025201510502013EuropeAsiaPacificLatinAmericaNorthAmericaMiddleEastAfricaSource:InternationalUnionofMaritimeInsuranceRecommendationsforbusiness•Developoceanstrategieswithstakeholdersandsustainabilityfrontandcenter.Governments,environmentalactivistsand•Managelogisticsrisksandincreasesupplychainresilience.maritimecommunitieswillpaycloseattentiontocompanies’Althoughshippinginsurancerateshaveincreased,asteepermaritimeactivities.Thepotentialforreputationalandfinancialriseincoverageratescouldimposesignificantlyhigherglobaldamagetocompaniescouldbesubstantialifbusinessoperationsshippingcostsforcompaniesheavilyreliantonmaritimeresultinecologicalharm.Conversely,companiesthatdevelopdeliveries.Companiesmayalsofaceshippingdelaysanddamageoceanicresourcesinconsultationwithrelevantstakeholderstoorlossofcargosandvesselsifamajorconflicterupts.willlikelyhavemoresustainablestrategiesforlong-termvalueExecutivesshoulddevelopcontingencyplanstomitigateriskscreation.Forinstance,miningcompanieswhoseextractionandlimitcostincreases,whichshouldinformongoingstrategiestechnologycanprofitablyminetheseabedwhileseverelylimitingforde-riskingsupplychainsthroughconsiderationofmoreenvironmentaldamagewillbeatacompetitiveadvantage.regionallybasedapproaches.Sectorsdirectlyaffected•Exploremaritimeinnovationandinvestmentopportunities.Deepseamining,aquacultureandothermaritimeeconomicAdvancedmanufacturingandmobilityactivitiesareripeforinnovation.Asattentionontheoceaneconomyrises,thesesectorsarelikelytobecomeincreasinglyConsumerproductsandretailactivemarketsforprivatesectorcapitalandgovernmentinvestment.Forinstance,thedemandforavarietyofdefenseEnergyandresourcesproductsandservices—includingconventionalwarships,surveillanceaircraftandmaritimemonitoringsystems—isFinancialserviceslikelytorise.Andinvestmentsinmarket-basedsolutionsformanagingmarinesanctuariesandexpandingsustainableGovernmentandinfrastructureaquaculturearelikelytoexpand.ExecutivesshouldexplorewhatstrategicopportunitiestheexpandingoceaneconomyHealthsciencesandwellnessmayoffertheircompany.2024GeostrategicOutlook188.CompetitionforcommoditiesTheme:MultipolarityAction:AdaptsustainabilitystrategiesClimatechange,thewarinUkraineandtheenergytransitionSeaGrainInitiative.Somecountries,suchasMexicoandIndia,willareshiftingglobalsupplyanddemanddynamicsforavarietyofcontinuetoimposetargetedexporttaxesorbansonagriculturalessentialcommodities.Thenumberofcountrieswithextremecommoditiestosafeguarddomesticsupply.AndChina—astheonlywaterstresshasrisenfrom17in2019to25in2023,accordingcountrytobeatopglobalimporterofallsixkeycerealsandmeatstotheWorldResourcesInstitute.Since2021,theFoodandreportedbytheFoodandAgriculturalOrganization—willcontinuetoAgriculturalOrganization’sworldfoodpriceindexhashoveredatprioritizefoodsecurity,includingthroughaccesstoforeignsuppliesitshighestlevelssincethe1970s.AndtheUSGeologicalSurveyviawhatsomeresearchershavecalledthe“FoodSilkRoad.”estimatestheglobalproductionofrareearthshasincreased131%inthefiveyearsto2022,includingsignificantproductioncomingThecompetitionforenergyandfoodwillbecomemoreonlineintheUS(seefigure9).Geopoliticalcompetitionwillinterconnectedasbiofuelsarepartofcurrentdecarbonizationintensifyin2024tosecuresuppliesofthreekeycommodities:efforts.TheInternationalEnergyAgencyestimatesthatbiofuelscriticalminerals,foodandwater.willaccountforabout22%ofglobalmaizeproductionin2024,forinstance.ThiscouldbecomeasalientpoliticalissueincountriesThefirst—andlikelymostvisible—areaofcommoditycompetitionfacingfoodinflationorinsecurity,asa50%reductioninthegrainwillbeforthecriticalmineralsthatpowerEVbatteriesandtheusedforbiofuelsinEuropeandtheUSwouldcompensateforenergytransitionmorebroadly.China—whichbuiltitsindustryallthelostexportsofUkrainiangrains,accordingtotheWorldduringaperiodoflowgeopoliticaltensions—willretainitsstrategicResourcesInstitute.positionastheworld’slargestrefinerofcriticalmineralsintheneartomediumterm.Somemineral-richcountrieswillfollowtheleadofWaterwillbethethirdareaofcommoditycompetitionin2024IndonesiaandNamibiainrequiringmorevalue-addedprocessingastheElNiño-SouthernOscillationclimatepatternisforecasttodomestically.AndtheUSandtheEUwillseeksupplyarrangementscreatesignificantswingsinprecipitationlevels.Geopolitically,withcountriesaroundtheworld—includingthroughtheMineralsthiscouldescalatetensionsinwater-stressedregions,asonlySecurityPartnershipandtheLobitoCorridor.24outof153countrieswithtransboundarywatershavecomprehensivecooperationarrangements,accordingtoUNWater.Agriculturalcommoditieswillbeanotherareaofcompetition,Domestically,policymakerswillbegintoprioritizeadjustinghowasfoodinstabilityandinsecurityremainsatopconcern.Climatewaterresourcesareallocatedacrosssectorsandjurisdictions—changewillcontinuetoaffectcropyieldsandfoodproduction,whilesuchasthe2023conservationagreementfortheColoradoRiverthewarinUkrainewillcontinuetolimittheglobalsupplyofgrains,amongsevenUSstates.particularlygivenRussia’sreluctancetoreengageintheBlack192024GeostrategicOutlookRecommendationsforbusiness•Innovateacrosssectorsonwaterchallenges.Manywaterchallengesaretheresultofoutdatedassumptionsbuiltinto•Explorecriticalmineralsinvestmentopportunities.existinginfrastructureandlegalagreementsandsoareripeGeopoliticalcompetitionforcriticalmineralsislikelytoforinnovation.Heightenedattentiontowateraccessrightsiscontinuetocreatemorefavorablemarketandregulatorylikelytocreatechallenges,butalsoopportunities.Governmentsdynamicsintheminingsector,leadingtomoreexplorationcouldseizeontheshiftsinherentinthegeopoliticalmultiverseandextractionopportunities.Companiesinotherpartsofthetoaddresstransboundarywatertensionswithneighboringvaluechain,suchasmetalsrecyclingcompanies,willlikelyalsocountries.Policymakersshouldcollaboratewithwaterutilitieshaveopportunitiestoinnovateandexpandtheirbusinesses.andtechnologycompaniestodesignandinvestinimprovedExecutivesshouldincorporategeopoliticalandsustainabilitywatermanagementinfrastructure.Andwithasignificantpolicyconsiderationsintotheirinvestmentdecisions.ElNiñoclimatepatternlikelyin2024,governmentsandcompaniesshouldplanforheightenedemergencyassistance•Improveagriculturalandfoodsupplychainresilience.Globalneedstodealwithbothfloodinganddroughts.disruptionsacrossthefoodvaluechainwillpersist,requiringmarketparticipantsfromfarmerstogrocerstoreevaluatetheirSectorsdirectlyaffectedcurrentsupplynetworksanddiversifywherepossible.Thiscouldincludeusinginnovativefertilizers,sourcingagriculturalAdvancedmanufacturingandmobilitycommoditiesfrommorelocationsorotherresilience-enhancingstrategies.Inmanycases,theremaybeopportunitiestoConsumerproductsandretailpartnerwithgovernmentsortoaccesspublicfinancingtohelpimprovenationalfoodsecurity,includingthroughtheG7EnergyandresourcesHiroshimaActionStatementforResilientGlobalFoodSecurity.FinancialservicesGovernmentandinfrastructureHealthsciencesandwellnessTechnology,mediaandtelecommunicationsFigure9.Miningexplorationspendinghasincreased35%inrecentyears,withsignificantgrowthindevelopedmarketsMiningexplorationspendingbydestination(USDmillions)3,50011%3,00086%74%2,5002,00087%1,50024%4%-13%-21%19%1,000-17%5000CanadaAustraliaUSChileMexicoPeruChinaArgentinaRussiaBrazilDRCongoOther20182022Note:Thetop12marketsforminingexplorationspendingareincludedonthegraph.Source:S&PGlobalMarketCapitalIQPro2024GeostrategicOutlook209.DualtrackgreenpoliciesTheme:De-riskingAction:AdaptsustainabilitystrategiesAmidsloweconomicgrowthandhighinflation,severalgovernmentsIncertaincountries,somecitizenswillgrowfrustratedwiththein2023startedtobacktrackonpreviouslyagreedemissionsperceivedlackofcomprehensivesustainabilityefforts,whilereductionsregulationsthatraisecostsintheshortterm.Attheotherscontinuetojoineffortstoopposethem.Thiscouldinfluencesametime,governmentsupportforthedomesticgreeneconomyisoutcomesintheglobalelectionssupercycleandwilllikelyintensifyincreasing.In2024,thenationalgoalsofeconomicgrowthandenvironmentalactivismincertaindevelopedmarkets.Insomeenergysecuritywilldrivecountries’climatepolicies,magnifyingcountries,climateactiongroupsmayacceleratetheuseofthemultispeednatureofsustainabilityregulations.disruptiveprotests.GovernmentswillincreasesupportfordomesticgreentechnologyTherewillbeadualitytogreenpoliciesgeopoliticallyaswell.manufacturing,whichreinforcesbothenergysecurityandeconomicSomecountries’tradingpartnerswillobjecttoclimatepoliciesgrowthgoals,whilealsofurtheringdecarbonization.In2024,Chinathattheyseeasprotectionistordiscriminatory.TheEU’sCarbonplanstoinstall200GWofrenewablesandstartrollingout$72BorderAdjustmentMechanism(CBAM)willremainasourceofbillionintaxbreakstoboostEVdemand.IntheUS,thecontinuedglobaltradetensions;countriesmayenactretaliatorytariffs.implementationofthe2022InflationReductionActwillprovidegreenManylargeemergingmarketswillalsointroduceorexpandcarbontechsubsidiesandtaxcredits.TheEUplanstodeployupto$380pricingpoliciestofinancetheirgreentransitionsandensurebillionofEU-levelfundingby2030viatheGreenDealIndustrialPlan.competitivenessoftheirexportsinWesternmarkets.FollowingtheAndthegovernmentsofothermajoreconomies,includingBrazil,28thConferenceofPartiestotheUNFrameworkConventiononAustraliaandtheUAE,willcontinuetoinvestindomesticrenewables.ClimateChange(COP28)inDecember2023,geopoliticaltensionsmaycontinuetogrowbetweencountriesseekinggreaterclimateButsomegovernmentsmayslowtherolloutofsustainabilityregulationsambitionandfinancingandthoseseenasstallingtheagenda.tosatisfyshort-termeconomicobjectivesandappealtovoters.TheEUwillreducedisclosurerequirementsintheCorporateSustainabilityReportingButgeopoliticalcompetitionwillalsodrivemoregreeninvestmentsDirective(CSRD)thatenterseffectinJanuary2024andwillrelaxits2035inemergingmarkets,asChina,theUSandEUseektobuildinternalcombustionenginebanforcarsandvans.IndonesiaandJapanarerelationshipswithgeopoliticalswingstates.Forinstance,theChina-alsodelayingplannedcarbontaxesuntil2025(seefigure10).Incontrast,ledAsianInfrastructureInvestmentBank(AIIB)planstoallocatehalftheUSSecuritiesandExchangeCommission(SEC)isexpectedtointroduceofitsannuallendingforclimateprojectsby2025.TheUSandtheitsmuch-delayedclimatedisclosurerules,andCaliforniawillworktoEUalsoannouncednewprojectstogeneratesustainableeconomicimplementitsownreportingobligationsoverthenextseveralyears—growthincountriessuchasIndia,ArgentinaandEgypt.althoughpossiblelegalchallengescouldcreateuncertainty.212024GeostrategicOutlookFigure10.Regulationstopricegreenhousegas(GHG)emissionsarecoveringanincreasingshareofemissionsworldwideCarbonpricingpoliciesasashareofannualglobalGHGemissionscovered25%20%15%10%5%0%20102015202020232005ChinaEUJapanCanadaSouthKoreaRestofG20RestofworldNote:CarbonpricingpoliciesincludeEmissionTradingSystems(ETS)andcarbontaxes.Theemissionfiguresshownbygeographyrepresentthesumoffederal,nationalandsub-nationalinitiativesthathavebeenimplementedasofMarch2023.ThedecreasingshareofglobalGHGemissionscoveredbyEU’scarbonpricingregulationscanbeexplainedbytheparalleldeclineinshareofglobalGHGemittedbytheEU.TheinformationontheChinanationalETSrepresentsearlyunofficialestimatesbasedontheannouncementofChina’sNationalDevelopmentandReformCommissiononthelaunchofthenationalETSofDecember2017.TherestoftheG20includesArgentina(0.15%),Australia(N/A%asjustimplementedin2023),Indonesia(0.60%),Mexico(0.53%),SouthAfrica(0.84%),UK(0.19%)andUS(0.85%).Source:WorldBankCarbonPricingDashboardRecommendationsforbusiness•Remainfocusedonlong-termsustainabilitystrategy.Althoughmanygovernmentsareexpectedtoreducethe•Acceleratesustainabilityinvestments,partneringwithscopeofsustainabilityregulationsandmandatorydisclosuresgovernments.Companies—especiallythoseinvestingintheshortterm,companiesshouldcontinuetointegratesignificantlyinresearchanddevelopment—mayhavethesustainabilityintheirstrategyandduediligence.Stayingaheadopportunitytoaccessmorepublicfundsforgreentechnologyoftheregulatorycurvegloballyandsatisfyingthegrowinginvestments.Government-sponsoredreskillingprogramsfordemandsofcustomers,citizensandinvestorswillcontinuetostudentsandprofessionalscouldalsohelpcompaniestofilltheberewarding—forinstance52%ofexecutivesinthe2023EYcurrentlabormarketgapforgreenskills.CompaniesmayalsoSustainableValuestudysaidthatfinancialvaluefromclimatebeabletoobtaincapitalatlowercostforgreeninvestments,changeinitiativesexceededtheirexpectations.Thefocusonasmanyinvestorsassesslowerlong-termrisksassociatedwithenergysecuritymeansexecutivesshouldalsoincorporatesuchassets.Andheightenedlevelsofgeopoliticalcompetitiongeopoliticalconsiderationsintotheirgreenstrategiestoandinternationalclimatefinancingmayprovidegrowthmitigatetherisksofdisruptionsandcostincreases.opportunitiesrelatedtotheenergytransitioninemergingandfrontiermarkets.Sectorsdirectlyaffected•IncorporateshiftingtaxesandregulationsintooperationalAdvancedmanufacturingandmobilityandfinancialplanning.Governmentsbacktrackingordelayingcertainsustainabilityregulations,suchascarbontaxes,couldConsumerproductsandretaileasefiscalpressureoncompaniesintheshortterm.However,suddenshiftsinenvironmentaltargetswillcreateuncertaintyEnergyandresourcesforfinancialprojectionsandinvestmentstrategies.Forexample,changestopreviouslyagreedtimelinestophaseoutFinancialservicesinternalcombustionenginecarswouldaffecttheassumptionsandforecastsofEVproducers’strategies.Moreover,theGovernmentandinfrastructureemergenceofheterogenouscarbontaxesandtheiruncertainimplementationoutlookwillincreasecompliancecomplexityforPrivateequitycompanieswithglobaloperations.Technology,mediaandtelecommunications2024GeostrategicOutlook2210.ClimateadaptationimperativeTheme:De-riskingAction:AdaptsustainabilitystrategiesSincetheUnitedNationsFrameworkConventiononClimateChangereduceeconomicgrowth—inthe2012–2021period,storms,(UNFCCC)in1992,climatepolicyhasfocusedonmitigation—thatwildfiresandfloodsalonecausedlossesofabout0.3%GDPgloballyis,reducinggreenhousegasemissionstohaltclimatechange.IntheeachyearaccordingtoSwissRe.past30years,though,theclimatehasalreadychanged.Thelastnineyears(2014–2022)rankastheninewarmestonrecord,andtheWhereclimatechangehitshardest,thelossoflivelihoodswilllikelyWorldMeteorologicalOrganizationforecaststhatglobaltemperaturesleadtomorepoliticalinstabilityin2024.Forinstance,theStockholmwillreachnewheightsinthenextfiveyears.EvenaspolicymakersInternationalPeaceResearchInstitutefindsthatclimatechangestrivetomitigateclimatechangethroughemissionsreductions,intheSahelhasledtolivelihooddeterioration,resourceconflictstheurgencyofadaptingtothecurrentphysicalrisksofclimateandarmedgroupsexpandingrecruitment.Therehavealsobeenchangewillcomeintosharperfocusin2024.eightcoupsinSahelcountriesinthepastthreeyears.Morebroadly,societaldiscontentmentwithinsufficientclimateresilienceraisestheOnly5%ofpartiestotheUNFCCChadclimateadaptationplansinlikelihoodofmoredramaticchangesingovernmentsduringtheglobal2021,butthatskyrocketedtomorethan80%in2022,accordingelectionssupercycle.totheUN.Followingtheglobalstocktakeofadaptationactionsin2023,governmentswilllikelyfocusmoreonimplementationinClimate-inducedmigrationwillalsoreceivemoreattention.TheEl2024.ThiswillincludenewstandardsandinvestmentstoimproveNiñocyclemeansthenumberofinternallydisplacedpeopleduetheresilienceofbuildingstoenvironmentalhazards.TheUS,fortoweatherhazardsin2024mayexceedthealmost32millionininstance,isdedicatingmorethan$1billiontosuchefforts.Many2022.Morecross-borderclimate-inducedmigrationisalsolikelygovernmentswillutilizenature-basedsolutionstoreducetheimpactfromregionsathighrisk—whichtendtobeemergingandfrontierofextremeweather,suchascoolingpavementsinTokyoorbuildingmarkets,accordingtotheGlobalClimateRiskIndex—todestinationsdesignsthatcoolurbanareasinSingapore.FollowingtheTaskforceinEuropeandNorthAmerica.OngoingpoliticalsensitivitiesaroundonNature-relatedFinancialDisclosures(TNFD)recommendationsimmigrationinthesemarketscouldheightensocietaltensions.releasedinSeptember2023,theInternationalSustainabilityStandardsBoardmaylaunchaprojecttoincludebiodiversityinitsEstimatedadaptationneedsare5to10timeshigherthandisclosuresin2024.internationaladaptationfinanceflows,accordingtotheUN.Akeyquestionin2024willremainwhetherandhowdevelopedmarketAtthesametime,theadaptationinvestmentgapislikelytobecomegovernmentsfundclimateadaptationeffortsinemergingandmoreapparent.ThecurrentElNiño-SouthernOscillationcycleisfrontiermarkets(seefigure11).Natureislikelytobehighonthelikelytobeastrongclimaticevent,elevatingtheriskofextremeagendain2024,giventhe16thmeetingoftheConferenceoftheweatherin2024.Forinstance,AustraliaispreparingformoreParties(COP)totheConventiononBiologicalDiversity(CBD)willheatwaves,wildfiresandcyclones.SuchextremeweatherwillconveneinOctober.232024GeostrategicOutlookRecommendationsforbusiness•Prepareforpotentialcurrencyeffectsandtaxincreases.Climatechangeisdamaginginfrastructure,including•Investininnovativeadaptationstrategies.Asattentiontotransportationandelectricityinfrastructure,whichoftenleadstheclimateadaptationimperativeincreases,therewilllikelybetodisruptioninotherbusinessactivities.Whiletheclimatemorepublicandprivatecapitalavailabletofundtheresearchadaptationgappersists,governmentswillfacereducedtaxandscalingupofinnovativeadaptationstrategies—withincomefromdepressedbusinessactivitiesandincreasedfiscalsomeestimatesthatthiscouldbecomea$2trillionmarketexpendituretorebuilddamagedinfrastructure.Executivesannuallywithinthisdecade.Thiswillcreateopportunitiesforshouldprepareforthesubsequentworseningofagovernment’sinfrastructureandconstructionfirms,aswellascompaniesfiscalpositiontopotentiallydepressthevalueofthelocalofferingnature-basedandbiodiversity-enhancingsolutions.currency.CompaniesshouldalsomonitorwheresuchsituationsForinstance,morecitiesmayseekurbandesignersthatcouldleadtotaxincreases—eitheracrosstheboardortargetedincorporatetreesandwaterintocityscapestoactascoolants.atparticularindustriessuchasoilandgas—toimproveExecutivesshouldassesswhethertheircompanyhasaroletogovernmentfinances.playindevelopingordeployingclimateadaptationinnovations,whilealsoincludingadaptationstrategiesintheirownSectorsdirectlyaffectedoperationsandrealestatefootprints.Advancedmanufacturingandmobility•Incorporateclimatechangeintolocationassessmentsandinvestmentdiligence.ExtremeweathereventswillcontinueConsumerproductsandretailtodamagephysicalcapital,evenaschronicphysicalclimaterisks—suchasrisingsealevels—reducethevalueofcertainEnergyandresourcesassetsanddisruptbusinessoperations.ItwillbeincreasinglyimportantforcompaniestoincludesuchconsiderationswhenFinancialservicestheyinvestinnewmanufacturingplantsorotherlong-termphysicalassets,particularlygiventheincreasinghesitancyofGovernmentandinfrastructureinsurancecompaniestooffercoverageinhigh-risklocations.ExecutivesshouldincorporateanassessmentoflocalandHealthsciencesandwellnessnationalclimateadaptationplans,aswellasbiodiversityimpacts,intotheirdecisionsaboutsupplierrelationshipsandPrivateequitypotentialacquisitionsaswell.Technology,mediaandtelecommunicationsFigure11.Althoughadaptationfinancehasbeenincreasing,itstillfallsshortoftheneedsInternationalclimatefinancingindevelopingcountries,byregionandactivity(2016-2020)100%8%5%9%8%90%19%80%70%24%60%58%73%73%50%79%40%30%57%20%34%Africa10%22%18%13%0%AsiaAmericasEuropeOceaniaAdaptationMitigationCross-cuttingSource:OrganizationforEconomicCo-operationandDevelopment,https://www.oecd.org/environment/climate-finance-provided-and-mobilised-by-developed-countries-in-2016-2020-286dae5d-en.htm2024GeostrategicOutlook24SectorimpactsThetop10geopoliticaldevelopmentsinthe2024GeostrategicOutlookwillhavebroad-basedimpactsoncompaniesacrosssectorsandgeographies.Buteachdevelopmentislikelytohavemoredirectimpactsoncertainsectorsandsub-sectors,particularlyintheneartomediumterm(seeFigure12).Somesectorswillbedirectlyimpactedbyalloralmostallofthetop10developments,includingthe“highlystrategic”technologysectorandthe“traditionalstrategic”energyandinfrastructuresectors.Thekeymarketthemesandbusinessimpactsforeightsectorsareoutlinedinthissection.Figure12.Geopoliticalimpactsonbusinessesarebroadbased,butwillvaryacrosssectorsSummaryoftop10geopoliticaldevelopmentsbydirectsectorimpactsAdvancedmanufacturingandmobilityConsumerproductsandretailEnergyandresourcesFinancialservicesGovernmentandinfrastructureHealthsciencesandwellnessPrivateequityTechnology,mediaandtelecommunicationsThegeopoliticalmultiverseGeopoliticsofAIDomesticchallengesintheUSandChinaGlobalelectionssupercyclePrioritizingeconomicsecurityThediversificationagendaGeopoliticsoftheoceansCompetitionforcommoditiesDualtrackgreenpoliciesClimateadaptationimperativeSource:EYGeostrategicBusinessGroup252024GeostrategicOutlookAdvancedmanufacturingandmobilityOperationalandsupplychainmodelswillshiftIntheadvancedmanufacturingandmobility(AM&M)sector,threeprimaryissuesthatcompaniesfacearecapitalaccessandallocation,laborskillsandavailabilityandthesupplyofinputsandcomponents.Eachoftheseissueswilllikelybeaffectedbygeopoliticaldevelopmentsin2024.PrioritizingeconomicsecurityislikelytoaffectcapitalaccessandallocationformanyAM&Mcompanies.Thesepoliciesarefocusedonbuildingorexpandingcountries’domesticmanufacturingcapabilitiesinstrategicproducts,sosomemanufacturerswillbeabletoaccesspreferentialgovernmentfinancing,taxcreditsorothersubsidiesfornewcapitalexpenditureprojects.Similarly,manufacturersenteringorexpandinginnewmarketsaspartofthediversificationagendamaybeeligibleforgovernmentincentiveprograms.Shiftinginternationalfootprintsmaychangethepoliticalriskprofilesofmanufacturingfirms,requiringarefreshofboththeirstrategiesandriskmanagementprocesses.Thediversificationagendawillalsoaffectindustrialcompanies’laborforce.Labormarketpoliciesandtheskillsavailabilityinalternativemarkets—suchasthoseinSoutheastAsia,EasternEuropeandLatinAmerica—willbeimportantconsiderationsforindustrialcompanies,particularlythosethatrequirehigherskilledlabor,seekingtodiversifytheiroperationsorsupplychains.Andinsomedevelopedmarkets,strikesandotherlaboractivismhasbeenelevatedin2023,whichcouldpersistin2024.Geopoliticaldevelopmentswillaffectseveralaspectsofindustrialcompanies’inputsandsupplychainsin2024.Thecompetitionforcommoditieswillaffectthepriceandavailabilityofcriticalmineralsthatareneededforarangeofinputs,includingsemiconductors.SomeAM&Mcompaniesarealsolikelytobeaffectedbywateraccessissues,asgovernmentsseektoadjusthowwaterresourcesareallocatedacrosssectorsandjurisdictions,particularlyinwater-stressedareas.Thegeopoliticalmultiversecouldalsoaffectmanufacturers,particularlyviaitseffectonglobalenergyprices.Forexample,theongoingviolenceintheMiddleEastmayleadtoanincreaseinpricesofoil,somekeyfertilizers,organicchemicalsandbromine(Israelproduces30%ofthelatter).Thecontinuedshifttowardblocsandalliancenetworksmayalsoincreasecomplexityformanufacturerstryingtobalancecostsandrisksintheirglobalfootprint.And,giventhedispersednatureofmanufacturingvaluechains,ifthegeopoliticsoftheoceansdisruptsmaritimetrade,thenAM&Mcompaniescouldfacesupplydisruptions.Chinaremainsakeymarketformanymanufacturers,intermsofbothproductionandsales.Assuch,dynamicsassociatedwithdomesticchallengesintheUSandChinaarelikelytoimpacttheAM&Msectorinavarietyofways.ThestrengthofeconomicactivitywithinChinawillaffectmanufacturers’growthprospects,aswillanygovernmentpoliciestoexpanddomesticadvancedmanufacturingcapabilities.AndtheevolutionofChina’srelationswiththeUSandotherdevelopedmarketswillaffectthesupplychains,investmentsandstrategiesofmanufacturingcompaniesthathavefootprintsinbothsetsofmarkets.Therearealsoavarietyofaspectsofdualtrackgreenpoliciesthatcouldaffectbusinessmodelsinthesector.Theimplementationofemissionsreportingmaycreatechallengesforsomemanufacturers,forinstance.Atthesametime,governmentinvestmentinEVsislikelytocreateopportunitiesforsomeautomakers.Theclimateadaptationimperativemayalsoimpactmanufacturers,asextremeweathereventscancausesignificantdisruptiontotheirmulti-tieredglobalsupplychains.2024GeostrategicOutlook26ConsumerproductsandretailSustainabilityanddiversificationwillreshapesupplychainsCompaniesintheconsumerproductsandretailsectorsareamongthoseattheforefrontofincludingsustainabilityconsiderationsintotheirbusinessmodelsandstrategies.Assuch,governmentpoliciesassociatedwiththeclimateadaptationimperativemayprovideopportunitiesforconsumercompaniestoinvestinthisspacebothtoensuretheirownresilienceandtoinvestinnewproductsandservicestosupportclimateadaptationinthemarket.Atthesametime,however,marketsandcompanieswithinsufficientclimateadaptationinitiativesarelikelytosuffernegativeeconomicshocks,whichcouldleadtosalesandrevenueshortfalls.Dualtrackgreenpolicieswillalsoimpactconsumercompaniesastheyseektobalancecostandgrowthprioritieswithagrowingneedtodemonstrateanddeliversustainabilityfortheirconsumers.Asgovernmentscontinuetorolloutemissionsdisclosurerequirements,companieswillneedtomeasureandreportGHGemissionsacrosstheirsupplychainsandwillincreasinglyargueforstandardizationandharmonizationinreportingmetricsbetweendifferentregulatorybodies.Whilesomeconsumercompaniesmayseesustainabilitydisclosuresasawaytoadvertisetheirgreencredentials,otherswillfacescrutinyfromconsumersandinvestorsthatdrivesashiftintheirsupplychainstrategies.TheUSandChinaarethelargestconsumermarketsintheworldandaretypicallyresponsibleforalargeshareofgrowthamongcompaniesinthissector.DomesticchallengesintheUSandChinacouldthereforehavesignificantimplicationsforconsumercompanies.Ifdomesticchallengesineithermarketmanifestinmeaningfulways,consumercompanieswillfacereducedsalesandrevenueprospects.Chinaisalsoanimportantpartoftheconsumergoodsproductionandsupplychain,sopolicychangeswithinChinaorvolatilityinUS-Chinarelationscouldimpactcompanies’operations.Manyconsumercompaniesareembracingthediversificationagendabyexploringalternativemarketsforproductionlocationsandnewsupplierrelationships,partlytohedgeagainstanoverrelianceonkeymarkets.Somegovernmentsareprovidingincentivesforinvestmentsduetotheemploymentbenefitsthatjoiningglobalconsumersupplychainsprovide.Ascompaniesinothersectorsinvestinalternativemarkets,thebroadereconomicgrowththeseinvestmentsgeneratecouldprovideopportunitiesforretailerstoexpandintonewmarkets.Competitionforcommoditieswillbeparticularlyimpactfulfortheagribusinesssub-sectors.Risinginputcostswillhaveadirectimpactonthesupplyandpricesofagriculturalcommodities.Asaresult,farmersareaimingtodiversifythetoolstheyapply—suchasleveragingdatatoforecastyieldsandoptimizeinputs—tohedgeagainstinputpricevolatility.Freshwaterconstraintscouldalsoaffecttheagribusinesssector,asgovernmentsadjusthowwaterresourcesareallocated.Thegeopoliticsoftheoceansislikelytoaffectconsumerandretailcompaniesinmultipleways.Fisheriesconflictsandhowtheyareaddressedwillaffectthepriceandavailabilityoffishforfoodcompanies.Morebroadly,theriskofgeopoliticaltensionsdisruptingcriticalshippinglanescouldraiseshippingcostsandinsuranceratesforconsumergoodscompanies,manyofwhichhaveglobalsupplychainsthatrelyontheworld’sbusiestmaritimechokepoints.Ifshippingisphysicallydisrupted,consumercompanieswouldfacesupplychaindelaysandmountingcosts.272024GeostrategicOutlookEnergyandresourcesEnergyproductionandconsumptionpatternswillchangeAsatraditionalstrategicsector,almostallofthetop10geopoliticaldevelopmentswillhaveimplicationsforenergycompanies.Perhapsmostsignificantly,dualtrackgreenpolicieswillaffectthebusinessmodelsandstrategiesforcompaniesacrosstheentiresector.Atamacrolevel,somegreenpoliciescouldbeinflationaryintheshortterm.Inthelongerterm,theymaylowerinflationastheyshieldsomecountriesfromthevolatilityofglobaloilprices.Alongsidegrowingappetitefromconsumersandinvestors,thesepolicieswilldrivethepaceoftheenergytransitioninmarketsaroundtheworld,withthetransitionoccurringatdifferentspeedsandatdifferenttimesasinfluencedbygovernmentpolicychoices.Forinstance,somegovernmentsincludingtheUSandEUwillcontinuetoallocatefundingtoexpandlocalsupplychainsofcleantechnologies(e.g.,EVs).Theglobalelectionssupercyclewilllikelyinfluencetheambitionandspeedofgreenpoliciesinavarietyofkeymarkets.Alsorelatedtotheenergytransition,thesupplychainaroundcriticalmineralsisstrategicallyimportantfortheenergyandresourcessector.Thegeopoliticsoftheoceanswillaffectwhetherminingcompanieswillbeabletoexploreandextractseabedmineralresources.Andhowthecompetitionforcommoditiesplaysoutforcriticalmineralswillaffectminingcompaniesinavarietyofways,includingtheiroperationsandsupplychains,salesandrevenue,growthandinvestmentstrategies,andfinanceandtaxconsiderations.Thecompetitionforcommoditieswillaffecttherestoftheenergyandresourcessectoraswell,suchasforpowerandutilitycompaniesbuildingphotovoltaicplants,viathesupplyofrefinedcriticalmineralsforfirmsprovidingbatterystorage,andforbiofuelsproducersthroughthefoodversusfueldebate.Prioritizingeconomicsecuritywillalsoaffectwhereenergycompanieschoosetooperate,asgovernmentsseektoenhanceenergyself-sufficiencyandreducerelianceongeopoliticalrivalsforenergyresources.Europeangovernmentswillcontinuetopursuethesepoliciesacrosstheenergylandscape,giventheirhistoricalrelianceonRussiangas,inparticular,whileothergovernmentsarelikelytofocusmoreoncriticalminerals.Thediversificationagendawillalsoaffectwhereenergycompaniesexploreandexploitresources.Sincethepotentialdiversificationmarketsarelimitedbygeology,somegovernmentsarelikelytousetheirresourceendowmentsasleverstoraisetaxesonenergycompaniesorrequiremorevalue-addedinvestmentsintheirmarkets.Theenergytransitioniscontributingtothegeopoliticalmultiversebyexpandingthenumberofsignificantenergy-producingcountriesintheworld.ThewarinUkrainehasgivenavarietyofoilandgasproducersmoregeopoliticalleverage,whiletheexpansionofrenewableenergyandhigh-capacitybatteryproductionisincreasingtheswayofmineralsproducers.Thiscreatesbothchallengesandopportunitiesforenergycompanies’globalstrategies.Coupledwithde-riskinganddiversification,thismayleadtoco-locatingenergyproductionandconsumptionmoreclosely.Thegeopoliticalmultiversecouldalsoleadtothecreationofnewenergygroupings—forcriticalminerals,forexample—liketheOrganizationofPetroleumExportingCountries(OPEC)foroil.Itisalsocreatingamorecomplexanddynamicinternationalsanctionsenvironmentwithwhichenergycompaniesneedtocomply.Finally,theclimateadaptationimperativeislikelytohaveanincreasingimpactonenergycompaniesaspolicymakerattentionturnstowardsafeguardingbiodiversityandestablishingorexpandingcarbonsinks.Thereispotentiallyalargeamountoflandthatgovernmentscouldactivelykeepasundevelopedaspartofclimateadaptationefforts,whichcouldhavesignificantimplicationsforenergycompaniesinthemediumtolongterm.Notably,thesignificantscaleupofrenewabletechnologiesrequiredtoreachnet-zerotargetsby2050representsastrainonthenear-termsupplyofecosystemservicesandassets(e.g.,intermsoflandarea,miningactivitiesandinputssuchasammonia).2024GeostrategicOutlook28FinancialservicesShiftsinhowandwhereclientswillbeservedFinancialservicesisaheavilyregulatedsector,somostfinancialinstitutionshaveestablishedteamsandprocessesformanagingregulatoryrisks.Inaddition,fiscalandmonetarypolicieshaveadirectimpactonfinancialservicesinstitutionsviatheireffectsoninterestratesandthecostofcapital.Inthecurrentglobalenvironment,thereareawiderarrayofgeopoliticaldevelopmentsthatareimpactingthefinancialservicessectoraswell.Thecombinationofprioritizingeconomicsecurityandthediversificationagendaisaffectinghowbanksandinsurersthinkabouttheirglobalfootprintsandstrategies.Thesegeopoliticaldevelopmentswillcontinuetoshiftwhereglobalproductionandsupplychainsareconcentrated,whichwillshifthowandwherebanksservetheirclients.Andforinsurers,thesedevelopmentsarelikelytoposenewchallengesanddisruptionsthatmaynotyetbeaccountedforintheirinsurancemodels.Financialservicesinstitutionswillneedtomonitortheseshiftsintheirclientbasesandadjusttheirownfootprintsaccordingly.Dualtrackgreenpolicieswillalsoaffecthowbanksoperateinmarketsaroundtheworld.Manygovernmentscontinuetoputinplacepoliciesandregulationsthatrecognizetheroleofbanksasprovidersoffinancingforthegreentransitionandothersectors’decarbonizationefforts.Thereisagrowingdivergence,however,betweengreenpoliciesthataffectfinancialinstitutionsintheUSversusthoseinEuropeandmanyothermarkets.Bankswillneedtonavigatethisshiftinganddivergingsustainabilityregulatoryenvironment,withsomechoosingtoalignwithmoreambitiouspolicieseveninmarketsthatdon’trequireit.Thesedynamicsarealsolikelytoperpetuateagrowingdivideinbanks’strategicfocus,societalcommitmentsandprofitability.Thecompetitionforcommoditieswillimpactglobalcommoditymarkets,includingcapitalmarketsproductssuchascommodityfutures.Geopoliticaldynamicscouldleadtosignificantswingsincurrencypricesaswell.Thegeopoliticalmultiversewillalsoaffectcapitalmarkets.Astheworldmovesfromamoreunipolartoamoremultipolarsystem,amorediversesetofcurrenciesisbeingusedtoexecuteinternationaltransactions.Thiswillaffectforeignexchangeratesandcurrencymarketsmorebroadly—andcouldlimittheabilityofcentralbankstoworkeffectivelytogetherintimesofcrisis,whichwouldincreaseriskpremiaforthesector.Thegeopoliticalmultiversewillalsoaffectawiderarrayoffinancialinstitutionsviainternationalsanctions.Banksinparticularwillneedtomonitorandensurecomplianceinadynamicsanctionsenvironment.Insurancecompanieswillbeaffectedbyseveralofthetopgeopoliticaldevelopments,includingthroughmorefrequentlarge-scalerisks,gapsinthetypesofrisksinsurersareunderwritingandasqueezeonprofitability.Forinstance,thegeopoliticalmultiversecouldleadtomoreconflictsthatcouldincreasepoliticalriskinsuranceclaimsandalsoamplifyrisksinareassuchascybersecurity.Similarly,thegeopoliticsoftheoceansislikelytoraisepremiumsandpossiblyclaimsformaritimeinsurance.Andtheclimateadaptationimperativecouldcontinuetopressureinsurers’profitabilityingeographiesthatexperiencemorefrequentandsignificantextremeweatherevents.TheregulatoryraceassociatedwiththegeopoliticsofAIwillaffectfinancialservicesinstitutionsaswell.Firmswillfacedivergentregulationsacrossmarkets,complicatingdatamanagement,AIimplementationandregulatorycompliance.TheEUAIAct,inparticular,couldimposelargefinancialpenaltiesiffirmsfailtocomplywithitsprovisions.Butfinancialservicesfirmscouldhaveopportunitiestoparticipateingovernments’“regulatorysandboxes”totestnewAIapplicationsinacontrolledenvironment.292024GeostrategicOutlookGovernmentandinfrastructurePolicymakingchallengesdomesticallyandinternationallyGovernmentswillbeaffectedbyall10geopoliticaldevelopmentsin2024.Perhapsmostnotably,asignificantnumberofgovernmentsaroundtheworldfaceelectionsaspartoftheglobalelectionssupercycle.Theseelectoralcycleswillinmanycasesslowthepolicymakingagendaasgovernmentofficialsfocusonwooingvoterstowinelections.Inaddition,manycountries’electionssystemswillbeatriskofforeigninterference,whetherthroughcyberattacks,misinformationcampaigns,orfinancialoperations.Whilesomeincumbentswillwin,thiswaveofelectionswillalsobringnewindividualsintogovernmentleadershippositions.Inbothcases,freshpopularmandateswillprovidegovernmentswithanopportunitytopursuenewpolicyagendas.Prioritizingeconomicsecuritywillcreatebothchallengesandopportunitiesforgovernments.Suchpoliciesmayenablegovernmentstosupportnewinvestmentsintheireconomiesthatboostinternationalcompetitiveness—althoughtheymayfacechallengesassociatedwithrisingcostsandpotentialtensionswithtradingpartners.Andwhileagovernment’sownindustrialpoliciesmayboostinvestmentintheireconomy,similarpoliciesbygeopoliticalrivalsarelikelytodampenforeigndirectinvestment.Policymakersarethereforeengagedincompetitionwithothercountriestoattractprivateinvestment,particularlyinstrategicsectors.Governmentsingeopoliticalswingstates(thosethatarenotspecificallyalignedwithanymajorpowerorbloc)arelikelytobewell-placedinthiscompetition,ascompaniesseekalternativemarketsforproduction,supplierrelationshipsandsalesaspartofthediversificationagenda.Competitionamongpotentialdiversificationmarketscouldbecomefiercer,however,sogovernmentswillneedtoidentifytheirvaluepropositiontomultinationalcompaniesandputinplacepoliciesthatreduceanypotentialimpedimentstoinvestmentsintheireconomies.Butpressureonpublicfinancesmayconstraingovernmentsintermsoftheinvestmentincentivestheycanoffer.Infrastructurecompanieswillhavegrowthandinvestmentopportunitiesassociatedwiththeclimateadaptationimperativeanddualtrackgreenpolicies.Butinfrastructurecompanieswillalsofacelaborsupplyandproductivitychallenges,asstudiesfindthattemperaturerisesnegativelyimpactcognitiveandphysicalproductivityforoutdoororlabor-intensiveactivities.Manygovernmentswilllikelycontinuetofacetradeoffsassociatedwiththesetwoclimatechange-relateddevelopments.Domestically,policymakerswillneedtobalancecost,affordabilityandfinancingchallengeswithsustainabilityconsiderations—aswellastheinterestsandconcernsofdifferentsectorsandsocietalgroups.Internationally,governmentswillfaceamorecomplicatedpolicyenvironmentamidthedecliningstrengthofglobalmultilateralinstitutions.Thereareincreasingpressuresongovernments,particularlyindevelopedmarkets,tohelpothercountrieswithclimatechangemitigation,aswellashumanitarianreliefanddisasterrecoveryefforts.ThegeopoliticalmultiverseanddomesticchallengesintheUSandChinaarealsolikelytocreatemoredifficultiesinmanagingarenasofinternationalcompetition.Forinstance,thegeopoliticsoftheoceansrequiresmultilateralengagementonavarietyofissues,includingmanagingfishstocks,miningcriticalmineralsandsafeguardinginternetcables.Andaspectsofthecompetitionforcommoditiesalsorequireinternationalnegotiations,particularlysurroundingaccessrightsfortransboundarywaters.Whileprogressislikelyinsomeoftheseareas,policymakerswillfacehurdlestoachievingmultilateralagreements.Insomecases,theseissuescouldbecomegeopoliticalflashpoints,forinstanceregardingresourcerightsandshippinglanesintheArtic.Othertensionsassociatedwiththegeopoliticalmultiversemayalsoleadgovernmentstoimposemoresanctionsonrivalsandperceivedbadactors.ThegeopoliticsofAIwillalsobecomplicatedbythedividedglobalsystem.Regulatorsthatarefirstmoverswillhaveanopportunitytoinfluencethedevelopmentofothercountries’regulationsandbuildpublictrustinthemarket.Atthesametime,governmentswillfeelpressuretorampuppublicinvestmentinAIandcreateasuitableregulatoryenvironmenttoalsoattractprivateinvestment.WhilesomegovernmentsareseekingglobalconsensusonAIregulatoryframeworks,itislikelythatpolicymakerswillfocusoncoordinatingAIapproacheswithintheiralliancenetworks.2024GeostrategicOutlook30HealthsciencesandwellnessEvolutioninglobalfootprintsanddemandlevelsPharmaceuticals,medicaldevicesandotherlifesciencescompaniesarelikelytocontinuetobesignificantlyimpactedbygeopoliticaldevelopmentsin2024—particularlyintermsoftheirsupplychainsandoperations.Anddespitehealthcaredeliverybeingahighlylocalizedindustrywithuniquestructuralcharacteristicsineachcountry,itwillneverthelessbeaffectedbygeopoliticaldevelopmentsaswell.Aspartofprioritizingeconomicsecurity,governmentswillcontinuetoincentivizeormandategreatersupplychainresilienceforlifesciencescompanies.GiventheexperienceoftheCOVID-19pandemic,governmentsviewactivepharmaceuticalingredients(APIs)andmedicaldevicesasimportantforsocialandeconomicsecurity.Andtheintellectualpropertyofbiotechnologycompaniesisincreasinglyseenasanationalsecurityconcernandanelementofgeopoliticalcompetition.Manycompaniesinthesectorwilllikelyneedtoadjusttheirglobalfootprintsandsupplychainstocomplywithsuchde-riskingpolicies.Thiscouldraisecosts—intermsofinputs,productionandlabor—acrossthesector.Relatedly,thediversificationagendawillimpactlifesciencescompaniesintermsofwhichalternativemarketstheyexpandinorenter.Inadditiontogeopoliticalrelationsbetweentheirhomecountrygovernmentandthetargetcountry’sgovernment,executiveswillneedtoconsidercountry-specificpoliticalriskenvironmentswhenadjustingtheirglobalfootprint.Lifesciencescompanieswilllikelybenefitfrominvestmentincentivesinsomemarkets,buttheymayalsofacechallengesassociatedwithlaborskillsandavailabilityandinfrastructurequality.Insomecases,significantinvestmentsinupskillingworkerswillbeneeded.Throughoutthehealthsciencesandwellnesssector,organizationsareexploringhowtoharnessAItotransformhealthcare.Healthcareproviders,forinstance,areseekingtobetterleveragethedatatheyhavebeencollectingonpatientsfordecades.AndAIisalsobeingusedtoaddresshealthcareworkforceshortages.HowthegeopoliticsofAIevolveswillthereforehaveasignificantimpactondatamanagementandgrowthandinvestmentopportunitiesinthesector.RegulationsonAIcouldcreatecompliancerisksfortraditionalplayers,evenasAIcreatesrevenueopportunitiesforinnovatorsandnewentrants.Inaddition,greateruseofAIcouldheightencybersecurityrisks,ashealthdataisparticularlysensitivetocybercrime.Thedemandforhealthcareprovisionmayalsobeimpactedbygeopoliticaldevelopmentsviasecond-andthird-ordereffects.Forinstance,ifgovernmentsfailtoeffectivelyaddresstheclimateadaptationimperative,thenpublichealthislikelytoworsenduetothenegativeeffectsofextremeheatandpoorairquality(e.g.,fromwildfires).Thecompetitionforcommoditiescouldalsoaffectthehealthofsomepopulationsiftheyhaveinsufficientaccesstofreshwaterandfood.And,totheextentthatthegeopoliticalmultiverseleadstomoreconflictsaroundtheworld,healthcaresystemswouldbestressedinthoseareas.312024GeostrategicOutlookPrivateequityPolicy-driveninvestmentopportunitiesTheimpactofgeopoliticaldevelopmentsvariesacrosssectorsandgeographies,soforprivateequity(PE)firms,muchoftheimpactlandsattheportfoliocompanylevel.Anyorallofthetop10geopoliticaldevelopmentsmayaffectPEfirms,dependingonthesectorspresentintheirindividualportfolio.Butregardlessoftheirportfolioholdings,PEfirmsarelikelytobeaffectedbyseveralpoliticalrisksatamacrosectorlevel.PrioritizingeconomicsecuritywillaffectthePEsectorintwocountervailingways.Ontheonehand,theimplementationofmorerestrictionsoncross-bordertradeandinvestmentislikelytocreatemore“no-go”marketsegmentsorgeographiesforPEfirms,whichcouldrestrictgrowthandinvestment.Ontheother,governmentscreatingtheenvironmentorincentivizinginvestmentinstrategicsectorsdomesticallycreatestheopportunityformorelocalstart-upfundsinmarketssuchasChina.AndasindustrialpoliciessuchastheUSCHIPSandScienceActcontinuetoberolledout,thescaleofcapitalrequiredprovidesanopportunityforPEfirmstopartnerwithcorporatesinfinancingnewinvestments.PEwilllikelyseesuchinvestmentopportunitiesinsemiconductors,biotechnologyandotherstrategicsectors.Relatedtothis,thegeopoliticsofAIcouldalsoprovidethePEsectorwithopportunitiestoinvestinthisemergingindustry.Thusfar,venturecapitalhasbeenmoreactiveinthisspace,butasgovernmentsdirectmoreattentiontoinnovatingandcompetinginAI,morePEfirmscouldgetinvolved.However,cross-borderinvestmentsinAIbetweengeopoliticalrivalswilllikelyberestricted.ThePEsectorwillcontinuetofocusonenvironmental,socialandgovernance(ESG)considerations,bothintermsofreportingontheESGimpactoftheiractivitiesandasaninvestmentthesisforsomefunds.Dualtrackgreenpolicieswillaffectbothofthesedynamics.Ontheformer,PEfirmswillfacedifferentregulatoryrequirementstoreportontheemissionsassociatedwiththeirportfoliocompanies.Andonthelatter,governmentpoliciestoacceleratetheenergytransitioncouldcontinuetocreateopportunitiesforPEinvestments.Atthesametime,thereducedambitionofsomegovernments’climatepoliciescouldalsofacilitateopportunitiestomaketraditionalenergysourcesmoresustainable.Relatedly,theclimateadaptationimperativemayalsobecomeamoresignificantpartofsomefunds’investmentthesis.2024GeostrategicOutlook32Technology,mediaandtelecommunicationsRestrictionsoncross-borderinvestmentsandsalesGovernmentscontinuetoviewmanysub-sectorsandproductswithinthetechnology,mediaandtelecommunications(TMT)sectorashighlystrategic.Asaresult,prioritizingeconomicsecuritywillaffectavarietyofcompaniesinthissector.Semiconductormanufacturerswillcontinuetobethefocusofexportcontrolsandcross-borderinvestmentrestrictions,whileatthesametimehavingaccesstogovernmentincentivesandsubsidiesaspartofindustrialpoliciestobuildadvanced,localizedcapabilities.Telecommunicationscompanieswillalsohaveaccesstogovernmentincentivesandinfrastructurefunding,whilealsolikelyfacinghighercostsduetoregulationssurroundingwhichequipmentmanufacturerstheycanuseintheirnetworks.ThegeopoliticsofAIwillalsohaveasignificantimpactonthesector.ThedualracestoinnovateandregulateAImeanthatgovernmentswillactasbothadriverandaninhibitorofthesectorin2024.Thebalancebetweenthesecountervailingforceswillvaryacrossmarkets.Forinstance,somefirmsmayseetheEU’spoliciesasmoreinhibitingthanthoseinotherjurisdictions.Acrossallmajormarkets,technologycompaniesareseekingopportunitiestohelpshapetheregulatoryagendaonAI.Inmanyjurisdictions,theoutcomeofvotesintheglobalelectionssupercyclewillaffecttheoutlookforAIregulations.DomesticchallengesintheUSandChinawillalsoaffecttheTMTsectorinavarietyofways,sincethetwolargesteconomiesintheworldarealsoamongthemosttechnologicallyadvanced.China’seconomicpolicieswillcontinuetoprioritizethedevelopmentofgreaterdomesticcapabilitiesinsemiconductors,AI,quantumcomputingandotheremergingtechnologies.AndstateandfederallegislativedynamicsintheUScouldcreateamorefragmentedanduncertainregulatoryenvironmentforTMTcompanies,asstatesimplementdifferentpolicies,forinstanceondataprivacy.Morebroadly,thegeopoliticalmultiversewilllikelyaffectTMTcompanies’abilitytoinnovate.Ontheonehand,thebifurcationoftheglobaltechnologysectorintoblocscouldcreatemoreopportunitiesforlocalcompanies.AndglobalTMTcompaniesarelikelytohavegrowthandinvestmentopportunitiesingeopoliticalswingstates.Ontheother,heightenedgeopoliticaltensionsamongblocsoralliancenetworkscouldcreatemoresiloedtalentpoolsandresearchanddevelopment(R&D)hubs.TheongoingviolenceintheMiddleEastmaybeparticularlydisruptivetotheTMTsector,givenIsrael’sroleasatechnologyinnovationhub.Thereductionincross-borderdata,talentandintellectualpropertyflowscoulddampeninnovationgrowthinthesector.Inthegeopoliticalmultiverse,tensionsarelikelytoplayoutincyberspaceaswell.TMTcompaniescouldbethetargetofstate-sponsoredcyberattacks.Thegeopoliticsoftheoceansislikelytoaffecttelecommunicationsfirms,asconcerngrowsaboutthevulnerabilityofunderwatercommunicationsinfrastructureandconstructionofnewinternetcablesoccursingeopoliticallyactiveareas.AndthecompetitionforcommoditieswillaffectTMTcompaniesviathesupplychainforcriticalminerals,whicharecrucialinputsinsemiconductorsandothertechnologies.Companiesmayneedtosetupalternativesupplyroutes,engageincreativepartnershipswithminingcompaniesandpaymoreforcriticalmineralssupplies.WaterscarcitymayalsoaffectcompaniesintheTMTsector,aswaterisusedasacoolantindatacenters.TheremaybeincreasedpolicymakerandsocietalattentionongenerativeAI’shighwateruse,forinstance.Relatedly,dualtrackgreenpolicieswillaffectTMTcompaniesviaemissionsreportingintheirsupplychainsandtheirhighenergyusetostoreandanalyzedataindatacenters.ThewidespreadadoptionofAIwillheightenTMT’senergyuseevenfurtherbecauseAIrequiresveryhighlevelsofdataprocessing.Sometechnologycompaniesaretacklingthisissuebyexploringnewenergysolutions,suchasbuildingtheirownemissions-freepowerplants.ThispointstoafinalimpactofgeopoliticaldevelopmentsfortheTMTsector:someofthesechallengesalsoprovidetechnologycompanieswithstrategicopportunitiestobepartofthesolution.Forinstance,technologycanplayaroleinacceleratingorreducingthecostsoftheenergytransition.Similarly,technologicalinnovationsmayenablegovernmentstobetteraddresstheclimateadaptationimperative.332024GeostrategicOutlook“Anevenmorecomplexgeopoliticalenvironmentisonthehorizon.Businessesneedtoinnovateandadapttheirstrategiestostayahead.2024GeostrategicOutlook34AbouttheGeostrategicOutlookTheannualGeostrategicOutlookpresentsanalysisbytheEYtheywouldhaveimpactoncompaniesacrosssectorsandgeographiesGeostrategicBusinessGroup(GBG)ontheglobalpoliticalriskglobally.Thisimpactassessmentisalignedwiththesecondstepinenvironmentintheyearahead.TheGBGdefinespoliticalriskasimplementingageostrategy.Thetop10geopoliticaldevelopmentstheprobabilitythatpoliticaldecisions,eventsorconditionsattheincludedinthisOutlookarethosethatwereassessedtobebothhighgeopolitical,country,regulatoryorsocietallevelwillimpacttheprobabilityandhighimpact,broadlyspeakingforglobalcompanies.performanceofacompany,marketoreconomy.Importantly,thisdefinitionofpoliticalriskincludesbothchallengesandopportunitiesTheanalysisforeachofthe10developmentsinthe2024forglobalorganizations,creatinganimperativetodevelopmoreGeostrategicOutlookexploreshoweachdevelopmentislikelytostrategicapproachestomanagingpoliticalrisk.unfoldintheyearahead(scan),assessestheimpactofeachpoliticaldevelopmentonspecificbusinessfunctions(focus)andprovidesScanningtheexternalenvironmenttoidentifypoliticalrisksistheconsiderationsforhowexecutivescanmanagethem(act).Inaddition,firststepinimplementingageostrategy(seefigure13).Assuch,tothisOutlookincludesanalysisofthemarketthemesandbusinessselectthetop10geopoliticaldevelopmentsinthe2024Geostrategicimplicationsacrossthe10developmentsatthesectorlevel.AnditOutlook,theGBGfirstconductedacrowdsourcedhorizonscanningincludesrecommendedactionsthatexecutivescantaketomanageexercisetoidentifypotentialpoliticalrisks.Thecrowdsourcedinputseachgeopoliticaldevelopmentinastrategicandproactivemanner.camefromdozensofsubjectmatterresourcesacrossEYteams,includingthosefocusedonpublicpolicy,strategy,macrotrendsLookingbackatthe2023GeostrategicOutlook,geopoliticalandsector-leveldevelopmentsacrossallgeographicalregions.developmentsunfoldedlargelyasexpected.“Stabilizedvolatility”Thisscanencompassedthefourcategoriesofpoliticalriskintheprovedanaptdescriptionofgeopoliticaltensionsandgovernmentgeostrategyframework—geopolitical,country,regulatoryandinterventionineconomiespersistingandplateauingatanelevatedsocietal—throughoutallregionsoftheworld.TheGBGthenidentifiedlevel—atleastthroughthefirstthreequartersoftheyear.Tensionsadditionaldevelopmentsthroughinterviewswithsubjectmatterbegantoriseagaininthefourthquarter,though.Andgovernmentsresourcesinotherpoliticalriskorganizations.aroundtheworldfacedavarietyof“policytrade-offs,”includingnotablyonenergysecurity.However,centralbanksandfiscalNext,theGBGassessedalltheidentifiedpoliticalrisksalongtwopolicymakersmanagedtheinflation-recessionparadoxbetterthandimensions:theirprobabilityofoccurringandthedegreetowhichhadbeenexpected.Figure13.ScanningthegeopoliticalenvironmentisthefirststepinimplementingageostrategyEYgeostrategyframeworkScanFocusActIdentifyanddynamicallymonitorAssesstheimpactofpoliticalrisksManagepoliticalriskinaholisticpoliticalrisksforopportunitiesandoncompanyfunctionsandtheandcross-functionalmanneratchallenges:globalfootprint:boththeoperationalandstrategic•Revenuelevels:•Geopolitical•Growthandinvestment•Country•Operationsandsupplychain•Riskmanagement•Regulatory•Dataandintellectualproperty•Societal•Humancapital•Governance•Financeandtax•Reputationandcompliance•StrategyProbabilityxImpact=aPcotliitvieclaylmrisaknsagtoeSources:EYGeostrategicBusinessGroup352024GeostrategicOutlookAuthorsWithcontributionsfromAdamBarbina,DouglasBell,Ben-AriBoukai,AlessandroFaini,AriBenSaksandJayYoung.CourtneyRickertMcCaffreyEYGlobalInsightsLeader,TheauthorswouldalsoliketothankthefollowingindividualsfortheirassistancewithGeostrategicBusinessGroupthisreport:Director,EYKnowledgeErnst&YoungLLPLeeAddams,AnkurAgarwal,RituAgrawal,AdrianBaschnonga,GauravBatra,Ankitcourtney.r.mccaffrey@ey.comBayala,RagnaBell,SnehBhat,LizBolshaw,MarieABos,CharlesBrewer,AndyBrogan,OliverJonesElizabethBurgess,AaronTByrne,MalloryCaldwell,RanuCarroll,LaurenChupp,WestEYGlobalLeader,Coghlan,JonCopestake,AndrewCosgrove,GregoryDaco,MeganDahlgren,NingGeostrategicBusinessGroupDai,PatrickDawson,JimDoucette,JuliaDuggan,TimDutterer,AmandaEvans,Steveoliver.jones@uk.ey.comFouhal,NicolaGates,RyanGavin,HillaryGerlings,DeanGoldberg,AngelikaGoliger,FamkeKrumbmüllerDavinderpreetSGugnani,SandeepKGupta,JohnHallmark,AndrewHearn,JasonEYEMEIALeader,Hillenbach,AndrewHobbs,AndrewHorstead,GautamJaggi,AntonyJones,JunkoKaji,GeostrategicBusinessGroupAmanKaushik,JeanPKeleher,GregKerr,PrarthanaKhera,DavidKirsch,KateAKizer,famke.krumbmuller@parthenon.ey.comClaudioKnizek,LeventeKovacs,HarishKumar,KatieKummer,LisaLaMotta,KatieMack,ShawnMaher,UrviMajhi,ShaunMaxwell,AnneMcCormick,BenMcCullochKossak,JulieContactsMcQueen,ColleenMeeker,KarlMeekings,J.T.Metzger,SoorajMittal,SampadaMittal,BhavnikMittal,SamaraMiyagi,LoriMooreBaldino,GrantleyMorgan,CherelleMurphy,AmericasBridgetNeill,AmberNelson,ViddhiParekh,BarryPerkins,MichaelPifko,AnnMariePino,AdamBarbinaMarthaRaupp,MariaRodriguez,ViddhiRohitParekh,AnastasiaRoussou,MarekRozkrut,NewYorkCatRushton,RajniSadana,AnkurSadhwani,KaranSaksena,IramSana,FrankSchafer,Ernst&YoungLLPJoeSebestyen,MichelleFSettecase,AmalShah,JohnShumadine,JiwanjotSingh,adam.l.barbina@parthenon.ey.comSwapnilSrivastava,ShaunaSteele,ChristofferStone,BernardStringer,JuliaTay,KaranBen-AriBoukaiRTeluja,ArunVTom,DavidTorres,DakshTyagi,AnilValsan,JohnvanRossen,CarolineWashingtonDCVasques,AndreasWaelchli,ScottWelch,MichaelWheelock,LauraWilliams,AndreErnst&YoungLLPWinarto,LauraWinthrop,PeterWitte,OlivierWolf,EdmundCHWong,JeffWray,YiYXie,ben-ari.boukai@parthenon.ey.comJohnDeYongeandYifeiZhang.MaryKarolClineWashingtonDCAriBenSaksEMEIAErnst&YoungLLPMexicoCitymary.k.cline@ey.comari.b.saks.gonzalez@mx.ey.comAlessandroFainiDavidKirschParisHoustonJayYoungalessandro.faini@fr.ey.comErnst&YoungLLPDallasdavid.e.kirsch@ey.comErnst&YoungLLPAngelikaGoligerCourtneyRickertMcCaffreyjay.young1@ey.comJohannesburgWashingtonDCangelika.s.goliger@za.ey.comErnst&YoungLLPAsia-Pacificcourtney.r.mccaffrey@ey.comOliverJonesNobukoKobayashiLondonTokyoErnst&Young—UnitedKingdomnobuko.kobayashi@parthenon.ey.comoliver.jones@uk.ey.comKyleLawlessFamkeKrumbmüllerTokyoPariskyle.lawless@parthenon.ey.comfamke.krumbmuller@fr.ey.com2024GeostrategicOutlook36EYBuildingabetterworkingworldEYexiststobuildabetterworkingworld,helpingcreatelong-termvalueforclients,peopleandsocietyandbuildtrustinthecapitalmarkets.Enabledbydataandtechnology,diverseEYteamsinover150countriesprovidetrustthroughassuranceandhelpclientsgrow,transformandoperate.Workingacrossassurance,consulting,law,strategy,taxandtransactions,EYteamsaskbetterquestionstofindnewanswersforthecomplexissuesfacingourworldtoday.EYreferstotheglobalorganization,andmayrefertooneormore,ofthememberfirmsofErnst&YoungGlobalLimited,eachofwhichisaseparatelegalentity.Ernst&YoungGlobalLimited,aUKcompanylimitedbyguarantee,doesnotprovideservicestoclients.InformationabouthowEYcollectsandusespersonaldataandadescriptionoftherightsindividualshaveunderdataprotectionlegislationareavailableviaey.com/privacy.EYmemberfirmsdonotpracticelawwhereprohibitedbylocallaws.Formoreinformationaboutourorganization,pleasevisitey.com.AboutEY-ParthenonEY-Parthenonteamsworkwithclientstonavigatecomplexitybyhelpingthemtoreimaginetheireco-systems,reshapetheirportfoliosandreinventthemselvesforabetterfuture.Withglobalconnectivityandscale,EY-ParthenonteamsfocusonStrategyRealized—helpingCEOsdesignanddeliverstrategiestobettermanagechallengeswhilemaximizingopportunitiesastheylooktotransformtheirbusinesses.Fromideatoimplementation,EY-Parthenonteamshelporganizationstobuildabetterworkingworldbyfosteringlong-termvalue.EY-ParthenonisabrandunderwhichanumberofEYmemberfirmsacrosstheglobeprovidestrategyconsultingservices.Formoreinformation,pleasevisitey.com/parthenon.AboutEYGeostrategicBusinessGroupTheEYGeostrategicBusinessGroup(GBG)helpsorganizationstranslategeopoliticalinsightsintobusinessstrategy.Geopoliticsaffecteveryglobalorganization,fromstrategytosupplychain.Yetmanycompaniesstruggletoassessandmanagethisdisruptionandtheimpactsithasontheirbusiness.TheGBGharnesseslocalknowledgeandcollaborateswiththird-partyfirmstobringanaddedindependentpoliticalriskperspective.Withthebreadthofourstrategicandoperationalknowledge,EYteamsdevelopactionableplanstohelporganizationsbettermonitor,assessandmanagepoliticalrisks.©2023EYGMLimited.AllRightsReservedEYGNo.011480-23GblCSGNo.2309-4341598EDNoneThismaterialhasbeenpreparedforgeneralinformationalpurposesonlyandisnotintendedtoberelieduponasaccounting,tax,legalorotherprofessionaladvice.Pleaserefertoyouradvisorsforspecificadvice.ey.com

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