In our 2020 Geostrategic Outlook, the Geostrategic Business Group outlined four primary forces that are transforming the global business landscape — globalization, technology, demographics and environment — and assessed how these forces are shaping global and regional developments. The global outbreak of COVID-19 will in many ways accelerate the trajectory of each of these trends.
”The impact of the COVID-19 pandemic on business will be multidimensional, affecting supply chains, human resources, revenue, reputation and compliance. The "mapping" of these effects is extremely important in the context of rapid changes in government and public policy. Equally important is monitoring how the pandemic will interact with these four megatrends - globalization, technology, demographics and the environment - and assessing their results across the organization”, says Bogdan Ion, Country Managing Partner EY Romania & Moldova and Chief Operating Officer for EY South-East & Central Europe and Central Asia (CESA).
Globalization: a new regionalism gains momentum
In a matter of just a few weeks, COVID-19 has led countries around the world to close their borders. At the same time, multilateral governance institutions have thus far failed to coordinate the response to the pandemic at the global level. While these are not signs of globalization’s death knell, it’s clear the pandemic, which could aggravate rising nationalist and populist sentiments, will change the trend’s narrative and line of travel. Companies will have to adjust their geostrategies in areas such as supply chain diversification, where many multinationals already have been pursuing a “China plus one” strategy. Biosecurity concerns will intensify regionalism and localization.
Technology: global competition accelerates
Technology and innovation have proven critical to business survival and success, and the crisis is forcing late adopters of digitalization, remote working and e-commerce to catch up overnight. Both short- and long-term solutions to COVID-19 will depend on technology, even as the rapid escalation of social and business activity online has created an environment more vulnerable to disinformation campaigns and cyberattacks. The national security and economic implications of these changes and challenges will accelerate and sharpen the geopolitical nature of technology competition.
Demographics: aging catalyzes global rebalancing
The pandemic is accentuating the societal, economic and policy implications of aging. A country’s demographic profile will shape the operational and cost burdens the outbreak imposes: older societies face a higher human and economic toll from the disease and, perhaps, a slower economic recovery. Nations with large youth populations that encounter high unemployment and economic dislocations as a result of the pandemic may be at greater risk for social upheaval.
Environment: the race against the clock continues
Even as it has helped sharply reduce emissions, COVID-19 has wiped climate policy off the table as an immediate concern. It is unclear when and how the policy issue will reemerge, but it will. Common wisdom holds that economic uncertainty and hardship diminish the stature of environmental
concerns, but policymakers in Europe, and perhaps in the US, may use the crisis to prioritize more “green” energy and investment.
The pandemic is accelerating fundamental shifts in economic and social activity — such as curtailing commutes and air travel —that may persist after the crisis recedes; businesses and individuals are learning how to work, build and sustain teamwork, serve clients and live without getting on a plane. And many large institutional investors remain focused on sustainability, even amid the COVID-19 crisis.
How will COVID-19 affect political risks around the world?
The pandemic is unfolding in different time frames and ways in regions around the world, leading to divergent economic, political and societal implications. COVID-19 has intensified China’s growth slowdown, but Beijing has used past crises to make geostrategic shifts for long-term advantage and may do so again.
In the EU, fragmentation pressures have been highlighted by a pandemic response that has — at least so far — been uncoordinated and halting. And COVID-19 is delaying US presidential primary elections and party conventions; the pandemic is even overshadowing a potentially big swing in US policy after November.
More broadly, emerging markets are being hit hard by falling commodity exports, remittances and tourism receipts. Amid the rising costs of managing the pandemic, such current account shocks could catalyze political unrest.
What does all of this mean for companies?
In the “now,” as companies focus on business continuity, they clearly need to monitor the situation and assess the risk of exposure to the novel coronavirus of their employees and the impacts across their entire value chain. And while COVID-19 dominates the headlines and has put all other geostrategic business and policy issues on hold, the headlines will fade and the hold will lift. Companies should start looking ahead to the “next” of resuming work or scaling back up. And they should begin planning for the “beyond” of the new normal that will emerge when the pandemic is firmly behind us.
About EY Romania
EY is one of the world's leading professional services firms with 284,000 employees in more than 700 offices across 150 countries, and revenues of approx. $36.4 billion in the financial year that ended on 30 June 2019. Our network is the most integrated worldwide, and its resources help us provide our clients with services allowing them to take advantage of opportunities anywhere in the world.
With a presence in Romania ever since 1992, EY is the leading company on the market of professional services. Our more than 800 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. In 2014, EY Romania joined the only global competition dedicated to entrepreneurship, EY Entrepreneur Of The Year. The winner of the national award represents Romania at the world final taking place every year in June, at Monte Carlo. The title of World Entrepreneur Of The Year is awarded in the world final. For more information, please visit: www.ey.com
