Beyond Tariffs: Navigating the New Strategic Risk Landscape. Insights from Ray Dalio
In my previous article, I briefly touched on why tariffs are increasingly being used, mentioning geopolitical tensions, security concerns, patriotism, and the erosion of trust among nations. The feedback I received encouraged me to explore these deeper dynamics more fully and how risk management can play a role.
There is so much written on this - and i don't think I can add any more insights to it - so i will stand on the shoulder of giants such as Ray Dalio. Ray has eloquently unpacked the core issues driving this phenomenon in his article, "Don't Make the Mistake of Thinking That What's Now Happening is Mostly About Tariffs."
Dalio points out that the intense focus on tariffs often distracts from the underlying issues driving these trade disruptions:
Monetary and Economic Imbalances: Excessive debt, unsustainable fiscal practices, and economic imbalances between major nations, such as the debtor U.S. and creditor China, create tensions that manifest in tariff wars.
Political Fragmentation and Populism: Growing internal divides within countries—across education, wealth, values, and opportunities—fuel populist policies, often expressed through protectionist measures like tariffs.
Geopolitical Shifts: The erosion of a unipolar global order previously dominated by the U.S. has resulted in fragmented international relationships, trade disputes, and a weakening of traditional alliances.
Increasing Acts of Nature: Events like droughts, floods, and pandemics are becoming more frequent and severe, significantly disrupting economies and global supply chains, exacerbating existing economic and political stresses.
Technological Revolution (AI): Rapid advancements in technology, particularly AI, are fundamentally reshaping all aspects of life. AI impacts the monetary/debt/economic order, the political order, and international relations (economically and militarily), as well as amplifying the economic and societal impacts of natural disruptions.
Connecting this back to our earlier discussion, businesses must see beyond tariffs as isolated risks or symptoms; they are part of a broader strategic risk landscape requiring comprehensive reassessment.
From a risk management perspective, companies must now broaden their focus and deepen their long-term planning. We have to start somewhere, i will suggest:
Reassess Strategic Risks: Move beyond immediate tariff impacts and evaluate long-term implications on supply chains, market access, and competitiveness.
Enhance Supply Chain Resilience: Consider scenarios involving disrupted access to critical resources—minerals, technologies, or specialized workforce—and actively plan alternate sourcing strategies - think end-to-end resilience. I have written a couple of articles on this piece, which you can find in my profile.
Integrate Geopolitical and Environmental Analysis: Regularly include geopolitical trends, climate risks, and potential trade conflicts in strategic risk evaluations.
Leverage Technological Advances: Utilize AI and emerging technologies to predict, prepare for, and respond to rapid economic, political, and environmental changes.
Stress-test Business Models: Anticipate scenarios requiring fundamental shifts in operations, production methods, or even core business strategies.
I know, all of this is happening at the time when risk teams are at their busiest - dealing with increased compliance and stakeholder expectations! We need more of what we suggest others, which is prioritisation!
See you on the other side of it.
#risk #tariffs #geopolitical
