Every CEO should have a foreign policy

The growth of global trade networks requires companies to become more attuned to events beyond their home country. Getty

In today’s fast-changing world, CEOs are no longer just business leaders – they are also navigating a complex web of global forces that shape markets, regulations and economies.

From trade wars and supply-chain disruptions to shifting alliances and economic realignments, the challenges of geopolitics and geoeconomics are now business challenges. And as John Chipman, CEO of the International Institute for Strategic Studies, aptly coined in his Harvard Business Review article, every business needs a foreign policy.

But understanding these forces is only part of the equation. CEOs must also ask themselves a set of questions. Where can we add value? How can we shape the global environment we operate in? The answer lies in a new kind of leadership – one that aligns corporate strategies with national priorities, positions companies as “business diplomats”, and uses influence to drive both organisational and societal impact.

For decades, geopolitics might have seemed like a distant concern for the private sector. Today, it is impossible to ignore. Trade tensions, regional conflicts and economic shifts are now disrupting industries and reshaping the global business landscape.

Take Russia’s war in Ukraine, for example, which sent ripples through energy markets and global supply chains. Or consider the ongoing US-China decoupling, which has forced companies to rethink everything from sourcing strategies to market access.

Today, supply chains are all feeling different forms of pressure. The Covid-19 pandemic and geopolitical conflicts have exposed vulnerabilities, with 70 per cent of executives identifying resilience as a top priority, according to a 2023 McKinsey Global Survey.

Regional trade agreements such as the pioneering Regional Comprehensive Economic Partnership are shifting market dynamics in Asia. At the same time, divergent and fragmented global policies on climate, data and trade require companies to navigate increasingly complex global frameworks.

Trade tensions, regional conflicts and economic shifts are reshaping the global business landscape

CEOs must understand how these trends intersect with their businesses and prepare for the risks – and opportunities – they create. They have a unique opportunity to go beyond navigating geopolitics – they can help shape it. By aligning with their country’s national vision and the global sustainable development goals, business leaders can play a pivotal role in economic development and innovation, and have a positive global influence, beyond profit.

Moreover, as business diplomats, CEOs can champion national agendas and align their strategies with government priorities to unlock opportunities and build credibility. They can influence policy and use their platforms to advocate for policies that benefit their industries and broader society. CEOs can also enhance their country’s global reputation by leading in innovation, ethics and sustainability.

In today’s interconnected world, a corporate foreign policy is no longer a luxury; it is a necessity. It has evolved from being a tool for mitigating risks to becoming a strategic lever for thriving in a complex global landscape. Companies that adopt a proactive approach to navigating international challenges are not just protecting their operations but also positioning themselves as leaders in an era defined by uncertainty and rapid change.

At its heart, a corporate foreign policy serves as a blueprint for businesses to operate confidently across borders. It begins with robust risk management frameworks, enabling companies to anticipate and navigate geopolitical uncertainties such as sanctions, trade barriers and political instability. By identifying potential disruptions early, businesses can make informed decisions that protect their interests and ensure resilience.

Beyond risk mitigation, effective corporate foreign policy emphasises stakeholder engagement. This means forging meaningful partnerships with governments, non-governmental organisations and multilateral institutions. Such collaboration not only strengthens a company’s credibility but also enables it to contribute to broader global goals, from sustainable development to conflict resolution.

Finally, at the foundation of a forward-looking corporate foreign policy lies a commitment to global citizenship. Companies are expected to align their practices with international standards for sustainability, diversity and ethics. Demonstrating a genuine dedication to these values not only enhances reputations but also builds trust with customers, employees and communities worldwide.

In essence, a well-crafted corporate foreign policy does more than navigate complexity – it transforms challenges into opportunities, ensuring that businesses remain agile, relevant and effective on the global stage.

The most forward-thinking CEOs don’t just respond to global challenges – they help shape the environment in which they operate. They anticipate trends and stay ahead of geopolitical shifts through scenario planning and advanced analytics.

Companies in the semiconductor industry, for instance, are proactively navigating US-China tensions by diversifying supply chains and forming strategic alliances. In areas such as AI and other emerging technologies, CEOs can also collaborate with policymakers and work with governments to create favourable regulatory environments.

During the pandemic, pharmaceutical companies collaborated with policymakers to accelerate vaccine development and distribution. Most importantly, CEOs can foster multi-stakeholder alliances to tackle shared challenges, such as climate change, through partnerships with other businesses, governments and NGOs.

Geopolitical risks are real, but they also create opportunities for businesses to lead. Companies that embrace this challenge can not only protect their operations but also build influence, drive innovation and create value on a global scale.

The future belongs to CEOs who recognise that business and geopolitics are inseparable. By stepping into the role of business diplomats, they can navigate uncertainty, shape the future and contribute to their countries' success.