Over the last six years, companies have faced five major “uncertainty shocks” including Brexit, the U.S. presidential election, trade tensions between China and the U.S., the Covid-19 pandemic, and the Ukraine war. These shocks, driven by political fragmentation, reflect a new normal of global turbulence. They have real consequences for companies and are becoming more common. To adapt to this new reality, businesses should closely track global events, invest in flexibility, and create contingency plans. Uncertainty, which is hard to define, has been on the rise since the 2008 financial crisis. The drivers of uncertainty vary across different events, and organizations must respond by paying attention to global economics and politics, embracing flexibility, and implementing contingency plans to navigate major shocks.
| Signal | Change | 10y horizon | Driving force |
|---|---|---|---|
| Companies grappling with uncertainty shocks | Greater global turbulence | Companies adapting to frequent uncertainty shocks | Domestic and international political fragmentation |
| Uncertainty shocks have real consequences for companies | Uncertainty becoming more common | Companies adjusting by closely tracking global events, paying for flexibility, and considering contingency plans | Rising global uncertainty and geopolitical fragmentation |
| Measuring uncertainty through text-based approach | Rising economic and policy uncertainty | Improved measurement and understanding of uncertainty | Global financial crisis, European debt crisis, Covid-19 pandemic, geopolitical events |
| Global shocks are here to stay | Greater geo-economic fragmentation and polarized politics | Organizations coping with global uncertainty | Geo-economic fragmentation and polarized politics |
| Pay attention to global economics and politics | Value in following current events and engaging in lobbying | Increased focus on geopolitics and its impact on businesses | Turbulent times and the need to avoid surprise |
| Flexibility is more valuable in uncertain times | Willingness to spend more to keep options open | Increasing importance of flexibility in decision-making and resource allocation | Greater uncertainty and the need to adapt to shocks |
| Contingency planning is crucial in major shocks | Rapid decision-making and risk reduction | Increased use of contingency plans in response to shocks | Greater global volatility and the need for preparedness |