As a small business owner, I am the first to admit, that I don’t always think about geopolitics right when I get up in the morning or macroeconomics before I close my eyes at night. I’m thinking about my business’ bottom-line, the opportunities and risks moving forward, and how to augment or mitigate them.
Increasingly, however, it is incumbent upon all business owners, of all business sizes, to track and make strategic plans around the global politics. We live in a globalized economy and businesses can sell to any corner of the globe on the internet. New political dynamics like protectionism and the tactics that follow, like tariffs and other non-tariff barriers, only serve as needless distractions.Pulling out of international trade agreements, only to watch the agreements go ahead without the United States’ influence and input, is damaging.Targeting immigrant populations, the same people that have invented and labored for America, is counterproductive.
So why should we care about these macro-level factors that do not affect the bottom line on a daily basis? For too long, business strategy and management have existed outside the realm of politics. Here are just a couple reasons to incorporate a global risk or political risk component into your business strategy model.
Political risk analysis shows where the opportunities are, too. When a country resolves a conflict, they begin a process of redevelopment that usually invites foreign businesspersons to learn about new opportunities. These opportunities, which fall in the “fat middle” between countires where business is not an option (North Korea) and places where business is too established to make new inroads (Germany). But for every North Korea, there are 10 or more countries like Colombia, Vietnam, Nigeria… places where investment is not only crucial for the economy but has outsized benefits for the human beings that live there!
Perhaps the biggest reason to care about the global political context is understanding why American business has thrived over the years in the first place. In addition to a fiercely innovative and competitive culture, the US and its partner have done so well because the political security rendered by American military has in turn, perpetuated the dollar as the currency on which the world runs. It is not our aircraft carriers, but the free trade and passage of goods and services on the open oceans ensured by these ships that has made us prosperous.
That's easy to forget. In a world thankfully devoid of large-scale, interstate conflict since WWII, we tend to forget that economies are only open for business when there is a security guarantee that customers, employees and property will not be in danger or damaged. Oftentimes we rely solely on strong economic ties to rule out war (see: China). This is not always a failsafe. It is worth remembering Great Britain and Germany had strong trading ties before WWII, before engaging in some of the bloodiest conflict known to history.
By engaging in global commerce, being aware of risks and opportunities on micro and macro levels, we become de facto diplomats. Global commerce is perhaps the best form of international people-to-people communication we have. So before you go to bed tonight, please do consider your global opportunities: the politicians will thank you.
About this Author
Trevor Jones is the Co-Founder of Lynx Global Intelligence