Businesses at Davos worried by geopolitics

Big companies and economists have for years have plotted their future growth in purely business terms with no reference to social and political issues. But after the Covid-19 interruption and the long breakdown of supply chains, followed by persistent inflation which forced the central banks to raise interest rates, and the eruption of wars in Ukraine, Gaza, Red Sea, the new mood is one of cautious optimism, hoping things would turn out better but not betting on that. Call it return of realism in the business circles.

David Garfield, Global Head of Industries says, “Just when governments and companies get their arms around how to deal with one flare-up, another emerges.” So, the response according to Garfield: “Sophisticated companies are saying: ‘What happens if raw materials for critical production cuts off’?”

Senior partner at global consulting firm McKinsey Ishaan Seth sums up the new plan of companies about the political uncertainties hanging in the air. He says the strategy is not anymore about “forecasting the future but it is about having a perspective on how the world may play out. The key is: how do you pivot an organisation quickly?” Big businesses are then about strategy than about expanding business or increasing profits, though the motive to become bigger and rake in higher profits remains.

But the situation that they see around the world compels the top executives to think of ways of dealing with unexpected developments, whether it is a pandemic, a war or inflation. They are also worried about political outcomes, for example the American presidential election at the end of the year. Boston Consultancy Group Global chair Richard Lesser puts the issue in straight and simple terms: “The (board level) concerns are geopolitics, and elections around the world. When there is so much uncertainty CEOs and boards ask, ‘What can I do to be better prepared’?”

However cautiously, the top honchos are hoping for an upturn in American economic performance, an improvement in the Chinese economy though they are not optimistic about Europe. They also feel that the US Fed could reduce interest rates but they are not betting on it. They are focusing on the two big economies, and it is the reactivation of these two that would make global economic growth a greater certainty.

What seems to be reassuring to them is the fact that the American economy did not slip into a recession as was feared, and that it has managed to perform reasonably well. Secondly, they also foresee a turnaround in the Chinese economy which had gone through a rough patch for two years since the end of the pandemic.

The meetings at Davos have always been upbeat. The political leaders spoke to business leaders in the language of business, of opportunity, of investments and of profits. This year, the business people are taking a long look at the political developments. Though they are hesitant to offer any suggestions as they have no clue about the complexities of politics, they are unable to leave politics to politicians.

They are worried about the political situation. After a long time, business people have realised that economies can grow and prosper, and private businesses make profits only when peace prevails in the countries and among the countries.

Peace is the prerequisite for economic well-being. The question is whether the influential big business pressurise the governments to move towards peace rather than conflict. Business people have courted politicians to gain business advantages, but they did not realise that unless politics is straightened out, it will be difficult for them to do business and remain prosperous. The businesses have to share the political responsibility to ensure that there is an end to conflict.