Egypt’s economy has faced significant geopolitical risks. Since the start of the war between Russia and Ukraine in 2022, a key source of grain, oil, and tourists, Egypt’s inflation surged sharply, rising from 7.3% to an all-time high of 38% in September 2023. The pound lost half its value in the official market, and an informal market emerged as foreign portfolio investors withdrew amid concerns about the economic fallout from the conflict.

In 2023, Yemen’s Houthi rebels targeted commercial freight entering the Red Sea, sharply reducing cargo traffic through the Suez Canal and, in turn, decreasing dollar inflows to Egypt by more than 60% between 2023 and 2024.

Additionally, the ongoing war in Iran has spilled over into GCC countries with the blocking of the Hormuz Strait, a 33-kilometer-wide passage that carries nearly all oil and liquefied natural gas exports from the Gulf nations, according to the International Energy Agency. The result was an over 15% rise in Brent and WTI oil prices during the first week of the dispute.

If conflicts persist, local companies will need to adjust their long-term strategies to remain resilient. “Business leaders today view geopolitical tensions as the biggest risk to economic growth,” McKinsey noted in 2024. “CEOs and boards understand that a shift in the global order is underway.”

Finding resilience

Domagoj Juricic, a senior consultant for MKPS, a consultancy, said in a September op-ed on LinkedIn, “For decades, CEOs could afford to treat geopolitics as the background noise of business. Elections came and went, governments rose and fell, but the global order remained broadly predictable.”

That is no longer true, especially with the ongoing Iran conflict, which comes on the backdrop of sanctions on a growing list of countries, along with rising trade wars and tariffs. “The risk is no longer occasional; it is structural,” Juricic said.

He stressed the way to manage geopolitical risks is “not by attempting clairvoyance, but by institutionalizing the ability to withstand and adapt to disruptions, regardless of their exact form.”

That “institutionalization” requires “a combination of exposure mapping, optionality, governance, intelligence, culture, and external anchoring, adapted to the realities of each sector,” Juricic said.

The right questions

To develop such a strategy, PricewaterhouseCoopers (PwC) recommends that top executives begin by asking the right questions. First, “How do shareholders and other stakeholders view geopolitical and related crises?” Second, “Is there a particular board member, … chief risk officer, or different board committees … assigned to oversee these risks?”

Thirdly, “How [is the] broad plan to oversee various business risks (cyber, supply chain, etc.) exacerbated by [relevant geopolitical risks]?” Top executives also need to map “the intersections among those risks” and determine if they have “the appropriate people, processes, and tools to fully understand the nature and magnitude of the relevant risks.” To prepare for long-term geopolitical volatility, PwC recommends that executives ask, “How might [the company’s] reputation be impacted by [its] response to the crisis?” and “Should [the organization’s] risk appetite change based on the crisis and its impact on [the] company?” Ultimately, they need a comprehensive view of the evolving landscape by asking, “How can this risk event affect your overall strategy, and are you ready for a pivot in case this risk increases?” 

A second set of questions focuses on internal operations, such as employee safety, potential sanctions, cybersecurity (especially as geopolitical risks often lead to increased cyberattacks), supply chains, the impact on third parties, and the organization’s financial stability, PwC noted. The goal of these questions is to ensure “clarity before control,” said Juricic. “Many firms discover under stress that they are far more vulnerable than they imagined. Until exposure is quantified and visualized, companies are managing blind.”

Proactive approach

When executives receive accurate and clear answers to these questions, a McKinsey report stressed the importance of adopting “a proactive approach to navigating geopolitics,” noting it “is essential to thrive.”

Developing such an anticipatory strategy would enable “business leaders [to] go beyond mitigating geopolitical risks to seizing the opportunities presented by the new world order,” said McKinsey. “Many have yet to grapple with [that] important implication.”

To identify and capitalize on these emerging opportunities, McKinsey noted, “Business leaders should be asking themselves questions such as, will our competitors’ products be more or less expensive than ours? … When and how can we align our business with trade flows into new corridors? What new economic and security alliances could also create opportunities … to grow or to change our cost structure?”

Another benefit of geopolitical volatility is government support will almost certainly increase to defend the economy. Accordingly, top executives need to ask: “What industrial policy incentives might present significant growth potential for us?”

McKinsey also said top executives in multinational companies need to ask, “How is our risk-adjusted cost of capital changing across geographies and how might we optimize our capital deployment?”

Additionally, the consultancy noted the importance of “key value drivers leaders [need to] explore in the wake of geopolitical shifts.” The first set of factors includes trade agreements; import and export control regulations; domestic environmental, labor, and immigration policies; tariffs and other trade barriers; and domestic industrial policies.

The second set relates to security. They include government-imposed foreign investment restrictions; sanctions; embargoes; a list of companies local firms can’t do business with; multilateral cooperation and alliances, such as NATO; and, lastly, technology, intellectual property, and cybersecurity controls.

Tech and geopolitics

Another aspect executives need to ponder is “how geopolitical risks will impact their digital agendas,” noted EY, formerly Ernst & Young, a professional services firm. “Geopolitics and technology are inseparably intertwined in today’s geostrategic environment.”

That link rarely registers on top executives’ radars, noted EY’s research. This oversight could prove to be an existential threat to the company’s growth. “As a CEO, you need to have a full grasp of the geopolitical risks that will impact your organization if you want your technology adaptation and digital transformation plans to succeed,” EY stressed.

The first technology risk companies face during geopolitical instability is a surge in cyberattacks. EY describes this as “one of the clearest examples of the interconnection between technology and geopolitics.”

This is evident from recent high-profile hacking incidents, such as attacks on Iran’s internet infrastructure, which reduced connectivity to 4% of normal levels in February; repeated assaults on Ukraine’s power grid since 2021; and India conducting espionage campaigns targeting Pakistani government agencies in March.

Ignoring the connection between geopolitics and technology can also harm the entire advanced technology sector. EY’s report states, “Governments are increasingly using industrial policy to promote self-sufficiency in strategic technologies.” Disruptions could drive foreign direct investment to more stable regions, especially if the original targets are in low- or middle-income destination in an inherently volatile regions like Egypt.

Another tech risk stemming from geopolitical divides is that local companies may face restrictions from governments preventing foreign competitors from operating in certain areas of the domestic market, noted McKinsey. Such barriers could lead to “diverging technological standards, [which] increases operating costs,” leading to “more fragmentation … rather than a global, digital economy.”

This tech segmentation means “changing technology regulations,” said EY. “The proliferation of data localization and data privacy rules across different markets will make moving or sharing data across borders more difficult for many companies. CEOs of multinational companies in sectors that use data extensively, particularly personal or consumer data, should expect to be most affected by these regulations.”

Finally, geopolitical volatility often accelerates geostrategic competition, particularly among advanced tech industries. The most notable example is the ongoing tech rivalry between the United States and China, which has led to “the U.S. … expanding export controls in strategic technologies and restricting U.S. market access for Chinese companies in the telecommunications and semiconductor industries,” McKinsey explained.

For other companies around the world, this tech divide may force executives to rely on technology developed in the U.S. or China to meet local regulations.

Resilient strategy

According to Juricic of MKPS, building a strategy amid these challenges requires more than just scenario-building; it involves “rehearsing the unthinkable, [where] the question … becomes whether companies can act quickly enough,” rather than whether they can at all. “That requires playbooks.”

One example Juricic highlighted was “a technology multinational with deep operations in China created three structured scenarios for worsening U.S.–China relations. In the mild case, it adjusted to data localization rules. In the severe case, it is prepared to split operations entirely between Chinese and non-Chinese systems.”

These scenarios were “rehearsed” with the executive team and reviewed annually by the board, Juricic said. The result: “When new cyber regulations were introduced, the company implemented its pre-planned structure within weeks, while competitors spent months arguing about compliance.”

Another example was a global agribusiness rehearsing scenarios of grain disruptions from Eastern Europe,” Juricic said. “When [Russia-Ukraine] cut off exports, it activated a logistics plan involving alternative Black Sea routes and expanded procurement in Latin America. Because the plan had been rehearsed, the activation felt like execution, not improvisation.”

The second major component of a resilience strategy is “governance,” said Juricic. “Geopolitical risk cannot be outsourced to a compliance department. It belongs at the board level.”

The third part is to “replace hindsight with foresight,” noted Juricic. “Many companies still rely on thick annual reports that are outdated the moment they are printed.”

Instead, he stressed that companies need to “build a real-time dashboard fed by local parliamentary agendas, draft regulations, and even media sentiment.” Such systems “provide early warning of foreign ownership restrictions, allowing a firm to restructure local entities before the law hardens. Competitors who relied on annual assessments were caught unprepared.”

The challenge of such an approach, Juricic said, is that “intelligence must be continuous, granular, and integrated into decision-making,” not a post-crisis reaction.

Ultimately, Juricic concluded, no matter how many drills a company conducts, “they do not guarantee foresight, but they ensure that when crises occur, leadership has already debated trade-offs and clarified thresholds.”

Major undertaking

Building such resilience is not only crucial for surviving until geopolitical volatility eases. “Today, in our world of uncertainty, resilience is the value proposition to stakeholders,” the PwC report stressed. “The market and customers reward those who can be trusted to deliver on their mission despite formidable challenges.”

However, it is challenging: “Organizations must have insight, foresight, oversight and the right capabilities — but most of all, they must have the strength to seize opportunities amid volatility, complexity and uncertainty,” said McKinsey.

Building such resilience brings significant rewards, as McKinsey stresshighlighted: “The executives who think deeply and act on the shifting world order today will be the market leaders of tomorrow.”