TELESTO STRATEGY

Board series: How can companies stay ahead of Political Risk under Trump 2.0?

MARCH 2025

In the past, political risk has been a specific category of risks that boards and management teams reviewed quarterly and managed through insurance policies. Acute issues were handled by task forces or crisis management teams. Now, under President Trump’s second administration, political risks are blurring and broadening to include: protectionist trade policy, sanctions, tariff retaliation, export/import bans, cyber-attacks, regional strife and conflict, border security, human rights, international terrorism, failed multilateral cooperation, increasing influence of populist governments, and more. With many of these themes presenting themselves weekly and daily, how do companies recast their political risk management under Trump 2.0?

Key Takeaways:

  • For large global companies, internalizing a broader spectrum of political risk will take greater effort, intelligence, and framing to cut through the noise and mitigate economic losses, ensure regulatory compliance, and avoid overcorrection
  • Framing political risks around key pillars of President Trump’s political agenda will help board directors anticipate policy shifts and build global scenarios. These categories include: U.S. trade policy and economic autonomy, China containment, border, terrorism, and cyber threats, energy independence, and critical mineral access
  • Like other forms of risks—climate, cyber—political risks are becoming increasingly difficult to insure
  • Successful global businesses will proactively improve the response time of their sensing functions, expand geopolitical scenario analyses, integrate political risks into their ERM processes, and build global, cross-functional task forces
  • Large multinationals will consider the environmental security implications of their corporate sustainability investments and how they contribute to strengthening U.S. national security

The evolving role of the board in assessing political risks

Geopolitical risks have long been a component of the board’s ERM systems. They do so for good reason, geopolitical disruptions cause economic damage to global businesses. For instance, Apple and Toyota faced increased production costs, decreased gross margins, and supply chain disruptions from the U.S.-China trade war during President Trump’s first administration. Amidst the Russia-Ukraine conflict, French banking group Société Général incurred a EUR 4.1 billion loss from the sale of its Russian subsidiary. Nestlé encountered logistical challenges and higher costs due to ongoing conflicts in the Middle East, while Unilever faced boycotts.

Geopolitical risks, however, are not sufficient in capturing the full extent of political risk that businesses must manage in today’s landscape. We see a broadening of “political risks” to include the many facets of President Trump’s America-first policy agenda – protectionist trade policies, tariff retaliation, sanctions, export/import bans, energy policy shifts, regional strife and conflict, border security, human rights, international terrorism, critical mineral access, foreign cyber-attacks, failed multilateral cooperation, and the burgeoning trend of populism globally.

For Political Risk to capture the full breadth of potential issues, we must cast a wider net.

A large swath of U.S. companies face these constant threats

First, consider that U.S. multinationals employ about 43.3 million people worldwide. However, their power is measured as much by the total dollars spent overseas as the number of workers. U.S. multinationals’ worldwide expenditures for property, plant, and equipment were $826.1 billion, and expenditures by majority-owned foreign affiliates were $196.7 billion in 2022. As such, U.S. businesses are in the world and of the world. This means the largest, most powerful U.S. businesses must monitor and respond to political risks domestically and globally. Select examples include:

  • Coca-Cola. Sells its products in over 200 countries and territories and employs more than 700,00 people worldwide (including its bottling partners), with more than 2.2 billion servings of Coca-Cola drinks consumed each day
  • Walmart. Operates more than 10,500 stores and clubs in 19 countries and e-commerce websites. It also boasts being the world’s largest private employer, with 2.1 million associates worldwide
  • Caterpillar. Its manufacturing, marketing, logistics, services, R&D, and related facilities total more than 500 locations worldwide
  • Apple. Operates in over 150 countries and regions
  • Meta. Meta Platforms operates in nearly every country in the world, with the notable exception of China (due to strict regulations)
  • Mondelez. Manufactures, distributes, and sells chocolate, cookies, biscuits, gum, and confectionery in over 150 countries
  • Amazon. Ships to over 100 countries and regions outside the U.S. and employs 1.6 million people worldwide
  • United. The world’s largest airline—flies to seventy-four countries and boasts 146 international destinations
  • Hyatt. Offers hotel accommodations in seventy-nine countries across six continents
  • Ford. Operates in over 125 countries with a broad global footprint of plants, offices, and joint ventures
  • McDonald’s. Has locations in over 100 countries and territories, with thousands of restaurants worldwide
  • Yum! Brands. Operates in over 150 countries and territories, with more than 59,000 restaurants worldwide, including KFC, Taco Bell, and Pizza Hut

How should companies recast political risk during Trump 2.0?

First, companies need to expand political risk beyond a strict sense of “geopolitical conflict” and the outbreak of war. Instead, they should consider how to get ahead of President Trump’s national security priorities. Then, they can recalibrate their risk mitigation strategies and cascading plans around trade, energy, product development, critical minerals, geopolitical conflict, and more.

President Trump’s America-first agenda will dictate these priorities. In reviews of all trade deals, alliances, regional efforts for cooperative arrangements for trade and security, and other policies and negotiations, President Trump has directed his team to find the most advantageous position for the U.S. Of course, how exactly that is done and what it means is the subject of intense, ongoing debate.

First, President Trump seeks to revitalize domestic manufacturing, decouple from global supply chains with the stated goal of achieving greater economic autonomy for the U.S., which is leading to retaliation and policy shifts from foreign governments :

  • Leverage tariffs to renegotiate trade deals. President Trump has proposed a myriad of tariffs on steel, aluminum, semiconductors, pharmaceuticals, copper, food, and other products. Moreover, the administration is targeting allies and adversaries alike, with geographically targeted tariffs on China, Mexico, Canada, the EU, Venezuela, etc. These decisions are still fluid, with markets swinging in response. These proposed and existing tariffs have thrown off large businesses, as they counter decades of global cooperation and violate existing U.S. treaty commitments like USMCA
  • Champion import substation industrialization (ISI). To protect domestic industries and stimulate growth, U.S. (e.g., Hamilton, McKinley, etc.) and global leaders have employed the ISI approach to protect nascent industries. These policies create their own set of risks, winners, and losers. At this point, recessive fears and consumer confidence may indicate that ISI will not yield the economic gains the Trump administration has projected
  • Stop foreign aid. Except for discrete programs handled by the Department of State, President Trump has pushed for an end to USAID and its foreign assistance programs, which may limit the U.S.’s soft power and sphere of influence in the Global South
  • Halt de-dollarization threats. Stemming from BRICS efforts to reduce reliance on the U.S. dollar in global trade, Trump has responded with threats of 100% tariffs and the complete exclusion of BRICS members from U.S. markets should they continue to push for de-dollarization

Next, President Trump has continued the emphasis from his first term in prioritizing China containment, the decoupling of the U.S. and Chinese economies, and heightening sensitivities to perceived military threats:

  • Amplify Hawkish China position. The bolstering of competition with and oversight of China represents a rare bipartisan focus under the new administration. This covers trade (tariffs, export/import bans, Most Favored Nation status) and investment policy, military competition, soft power, and technology and innovation. China’s leadership in EVs, renewable technology, however, is not being addressed
  • Block technology exports. Most recently the administration added dozens of Chinese companies (now over 50) to a trade blacklist, which impacts companies like Nvidia, Intel, and Advanced Micro Devices who sell to Chinese technology companies
  • Monitor outbound investment. President Trump has signaled he will restrict and monitor foreign investments that are considered a risk to national security, best exemplified by China’s sectors for semiconductors and high tech more broadly

Also, President Trump is also looking to make good on campaign promises to halt border-related security threats, mitigate terrorism threats, which are increasingly digital and cyber-related:

  • Mitigating cyberattacks from adversaries. The administration is putting pressure on states to prepare for cyberattacks as part of its wider push to overhaul the Federal Emergency Management Agency and its rolling out of a National Resilience strategy
  • Broaden anti-terrorism priorities. President Trump’s executive orders look to protect U.S. citizens from “aliens who intend to commit terrorist attacks, threaten our national security, espouse hateful ideology, and otherwise exploit the immigration laws for malevolent purposes.”
  • Secure the southern border. Hundreds of troops have already been deployed to the U.S. southern border for a wide-ranging mission that poses new challenges and raises questions about the military’s role in handling migration, a task typically under the purview of law enforcement

Furthermore, President Trump plans to advance his America-First agenda by achieving energy independence for the U.S.:

  • Solidify U.S. global energy leadership. President Trump’s administration will step up efforts to keep the U.S. as the world’s largest oil and gas producer by declaring an energy emergency, pushing to streamline permitting for gas development, and removing environmental protections in Alaska and other resource-rich protected lands
  • Expand oil and gas production on federal lands. President Trump is expected to terminate the leasing of federal lands and waters for offshore wind projects, while favoring oil and gas extraction on a growing portion of federal property
  • De-emphasize renewable energy technologies. The White House’s priority will shift from the renewable energy transition to energy security. For example, the administration and industry will seek protections and expansion related to domestic Liquified Natural Gas (LNG) production and distribution
  • Break global climate treaty. President Trump has ordered the removal of the U.S. from the Paris Climate Agreement again, which means the U.S. has ceded its global leadership role to influence shared environmental priorities, shape negotiations, and mitigate economic risks

A final pillar in President Trump’s national security agenda is to strengthen U.S. domestic production capacity and global access to critical minerals:

  • Take immediate measures to increase domestic mineral production. President Trump recently signed an Executive Order on March 20th looking to further expand the Nation’s domestic mineral production
  • Negotiate Ukraine-Russia deal to secure U.S. critical mineral access. President Trump has supported ceasing military and financial support for Ukraine while urging that nation to make a deal with Russia, despite Congress’s lack of unification around a specific strategy on this conflict. The President has suggested forcing Russia to comply by using the threat of additional sanctions. In exchange for continued military support, President Trump is looking to strike an agreement for access to Ukraine’s critical minerals
  • Strengthen influence in the Arctic for trade and mineral access. Rising geopolitical competition in the Arctic under President Trump involves major nations, including the U.S., Russia, China, Canada, Finland, Sweden, Greenland, Denmark, Norway, and Iceland. All are vying for control of the region’s resources, which include natural gas and critical minerals. President Trump has already expressed, on many occasions, intent to “take control” of Greenland due to factors including security concerns from Russia and China, the region’s remarkable resource wealth, and its positioning as a strategic trade route

Actions boards can take:

  • Plan many geopolitical scenarios and risk events and do so more often
  • Simulate responses and identify continuity gaps across the global portfolio
  • Engage external expertise with specific domain, technical, and geographical expertise – configure global listening to improve sensing for risks
  • Build geopolitical resilience by prioritizing investments in this area, diversifying supply chains
  • Bolster communication and crisis management teams and readiness
  • Track tariff and trade disruptions for core business and suppliers to core business
  • Integrate geopolitical risk into ERM, speed up reporting cadence
  • Work with governments, NGOs, and standard development organizations (SDOs) and civil society leaders to navigate complex geopolitical landscapes
  • Assess insurability of key threats to global enterprise and cross-border operations – cyber, climate (physical), and “traditional” political risks (e.g., outbreak of armed conflict under a force majeure clause)

Questions for the boardroom:

  • When was the last time our organization did a deep dive into the many facets of our political risk and the Trump administration’s national security agenda – economic autonomy, China containment, energy independence, and critical mineral access?
  • How often are we gauging the full spectrum of political risks? Is it sufficient? To what extent can these risks be insured? If not insurable, how can we best improve internal controls, processes, reporting, and systems?
  • How have we evolved our communications and crisis management teams to address the broader tapestry of political risks?
  • How can we best avoid distractions and the many headlines related to political risk without missing micro-events with macro-effects?
  • Who in the organization is best equipped to “own” the management of political risks given their greater breadth and depth?
  • How can we work with peer organizations to reduce the risk burden collectively?
  • How can we leverage outside-in and inside-out risk analyses to improve our scenario developments?
  • What are the early-warning indicators of risks across these dimensions of President Trump’s national security agenda?

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