The world in 2025 is splitting into competing political and economic blocs. Companies now face different rules in different markets, forcing businesses to make tough choices about technology, supply chains, and market strategy.
Oliver Wyman’s State of the World 2025 report calls for a "geopolitics-first" approach to business planning. Our recent Geopolitics & Business Summit identified four areas where companies need clear strategies:
Technology: The race for advantage
The US-China tech rivalry has created separate innovation ecosystems with different standards and market access rules.
Companies must now make calculated choices about their technology adoption based on their strategic priorities. A balance-sum game emerges where one decision to incorporate certain technologies may enhance competitiveness in one market while restricting access to another.
Organizations with regionally differentiated technology stacks that are supported by clear governance frameworks are more likely to adapt faster to regulatory changes and become better positioned for market shifts.
AI Spotlight
Ongoing competition between major AI developers highlights complex questions regarding copyright infringement in artificial intelligence development. In this environment, companies must exercise heightened diligence.
Open-source AI models present three critical considerations: whether they are genuinely 'open' or contain significant restrictions; the substantial computing infrastructure required for deployment; and the extensive datasets necessary for effective training and implementation.
For organizations implementing AI solutions amid these legal and technical complexities, a return to robust AI governance frameworks represents the most prudent approach. Sound governance policies provide essential guardrails in this rapidly evolving landscape.
— Kensaku Takase, Partner, Intellectual Property and Technology
Energy: Security meets climate goals
Energy markets are transforming as countries balance security concerns with climate commitments, creating both risks and opportunities for global businesses.
Companies that proactively map these dynamics and integrate them into strategic planning—with appropriate governance structures to manage the patchwork of compliance obligations across jurisdictions —are better positioned to navigate the transition profitably.
Forward-looking organizations are now reassessing energy sourcing strategies, supply chain resilience, and market positioning and developing frameworks for carbon accounting, renewable energy certification, and regulatory compliance to position themselves advantageously as markets evolve.
Spotlight on Southeast Asia
Renewable energy has emerged not just as a tool for combating climate change but also as a necessity for energy diversification and security. Southeast Asia stands at a critical juncture, navigating global shifts while addressing each country's unique energy and security challenges. The region must balance the delicate trilemma of energy security, affordability, and sustainability to ensure a resilient and sustainable future for the region.
Investment flows into Southeast Asia's renewable energy sector have been significant but need to increase to meet ambitious targets. Countries like Vietnam have implemented policies to attract foreign investment, such as the direct power purchase agreement (DPPA) decree. While in Indonesia, the government has set ambitious targets to increase the share of renewables to 35% by 2034. There is also potential for exporting renewable energy to neighboring countries like Singapore, which could drive further investment in the sector.
— Ang Kim Hock, Principal, Finance & Projects
Japan’s renewable energy investment
Japan's energy transition strategy will be a balancing act amidst shifting global dynamics. Japanese developers remain steadfastly committed to the government's ambitious 50% renewable target. Japanese consortiums are also leveraging bilateral agreements to secure diversified energy sources, with strategic investments flowing into high-potential markets like India and Vietnam. This dual approach—domestic transformation paired with carefully targeted outbound investment—positions Japan to maintain energy security while advancing its sustainability agenda in an increasingly complex regional landscape.
— Jon Ornolfsson, Partner, Finance & Projects
Corporate strategy in competing regulatory environments
The emergence of newly fragmented political blocs representing significant percentages of global GDP has complicated market access strategies for multinational corporations.
Business leaders now confront fundamental questions about corporate structures and compliance frameworks that impact market access, competitive position, and operations, from data governance to capital raising.
Companies need to enhance their transparency and disclosure practices, strengthen internal risk management processes, and ensure they have a geopolitical risk management framework that is aligned with their business priorities and values.
Spotlight on China
Geopolitical dynamics will increasingly shape multinational corporations' China strategies in 2025. Beyond the widely discussed 'China plus 1+N' approach, companies must develop nuanced strategies reflecting their sector positioning. Consumer-focused businesses will continue to value China as a crucial market, while high-technology sectors require more calibrated approaches.
Strategic evaluation should encompass multiple dimensions: market competitiveness against domestic players, alignment with China's economic priorities, and contribution to local development objectives. We continue to observe targeted investment in specific sectors for example the food & beverage and healthcare industries.
Ultimately, successful navigation of this complex landscape requires aligned leadership with clear risk frameworks and decision-making protocols. Companies must develop sophisticated awareness of cross-border issues and equip themselves with resources to respond effectively.
— Vivian Wu, Partner, Investigations, Compliance & Ethics, FenXun Partners*
Supply chains: Contract-based risk management
Global trade tensions have created unprecedented challenges for businesses operating across borders, especially in Asia Pacific where there are varying definitions of export control.
Commercial interests remain the priority as businesses navigate these shifts. Forward-thinking companies are revisiting their contractual agreements, paying particular attention to force majeure clauses, change of law provisions, and price adjustment mechanisms that provide flexibility during supply chain disruptions.
Spotlight on trade
The full implications of recent and multiple US trade policy shifts will take time to emerge. The uncertainty around the scope, timing and countermeasures will undoubtedly complicate organizational risk assessment and strategy.
Businesses will benefit from prioritizing developments with direct impact on their operations, rather than responding to every headline, and focusing on building resiliency by enhancing flexibility within their commercial agreements and testing scenarios to protect trade continuity regardless of policy fluctuations.
— Anne Petterd, Partner, Investigations, Technology, Communications & Commercial
Spotlight on dispute resolution
As geopolitical tensions exacerbate the risk of cross-border disputes, companies ought to recalibrate their approach to conflict management. Arbitration has emerged as the preferred method of dispute resolution, particularly in emerging markets, offering greater certainty in process and flexibility.
This is especially true for joint ventures, where sanctions, tariffs, and other developments impact operations and consequently, returns on investments. Companies taking a discerning approach to dispute management and resolution are well able to navigate conflicts while, possibly preserving valuable business relationships.
— Nandakumar Ponniya, Principal, Dispute Resolution
The path forward
Companies that build geopolitical awareness into their strategy — rather than treating it as a separate risk function — gain advantages in this divided landscape. As the US Congress and China's National People's Congress in March is expected to reveal some upcoming policies, businesses should be ready to reassess their positioning.
The winners in this new environment will not be those who avoid all geopolitical risks, but those who turn regulatory knowledge into strategic advantage.
* Baker & McKenzie FenXun (FTZ) Joint Operation Office is a joint operation between Baker & McKenzie LLP, an Illinois limited liability partnership, and FenXun Partners, a Chinese law firm. The Joint Operation has been approved by the Shanghai Justice Bureau.