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Geopolitics Keeping Business Leaders Up at Night

by Ivy

Geopolitical tensions continue to be a major source of concern for Australian executives, with the past 12 months adding further unease. In KPMG’s latest Keeping Us Up at Night survey, Australian business leaders have highlighted a growing sense of worry about both social issues and geopolitical developments.

While traditional business concerns like cost containment, achieving target investment returns, and driving revenue through innovation and market expansion remain central to strategic planning, these have been increasingly overshadowed by geopolitical and societal risks. As the global landscape becomes more unpredictable, business leaders are more attuned to the broader macroeconomic shifts that can affect their operations.

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Economic Uncertainty in Focus

KPMG points out that, according to the Australian Bureau of Statistics (ABS), private non-financial corporations saw a 5.6% decrease in gross operating surplus for FY24 compared to FY23. Moreover, 80% of the 15 industry sectors analyzed by the ABS recorded either a drop or stagnation in their ratio of gross operating profit to sales revenue for the 12 months ending June 2024. These figures underscore the challenges businesses are facing in an increasingly volatile economic environment.

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Despite these challenges, it’s the geopolitical and societal issues that are weighing most heavily on executives’ minds. KPMG notes that more than half of the world’s population participated in democratic elections in 2024, revealing significant trends in governance. The outcomes reflected a widespread backlash against incumbent governments due to rising costs of living, along with the continuing rise of populist leadership and economic nationalism.

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Populism and Global Trade Concerns

The rise of populism and economic nationalism has had a direct impact on business priorities, with KPMG’s global CEO Outlook revealing that supply chain concerns have once again risen to the forefront of business leaders’ minds. This shift is primarily driven by escalating global trade tensions, the imposition of punitive tariffs, and the adoption of inward-looking government policies that prioritize national interests over global trade.

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The KPMG survey also highlights that businesses are dealing with higher operational risks, including increased costs, intensified competition, and mounting regulatory pressure. These issues are not unique to Australia but are experienced globally, creating a sense of shared vulnerability among CEOs across industries.

Housing Affordability on the Rise

One issue that has gained increasing attention from Australian business leaders is housing availability and affordability, which has moved from the fifth to the top of their concerns. The lack of meaningful progress in addressing housing affordability, particularly for younger generations, has raised alarm among KPMG survey respondents. With the supply of affordable housing not keeping pace with demand, business leaders are concerned not just about the immediate implications, but also the longer-term challenges this issue poses for economic stability.

The medium-term outlook for housing supply remains uncertain, and many business leaders fear that the lack of action could exacerbate broader economic instability, further impacting the workforce and consumer spending.

Looking Ahead: Business Resilience Amid Uncertainty

In the face of these mounting geopolitical and societal pressures, Australian business leaders are tasked with navigating an increasingly complex landscape. With the elevated risks of operating in an environment marked by economic nationalism, trade disruptions, and social issues like housing affordability, resilience and adaptability are more important than ever for business success.

The results of KPMG’s survey paint a picture of business leaders who are not only concerned about immediate operational issues but also deeply attuned to the broader socio-political dynamics shaping the global market. For many, the focus is shifting from traditional business management to a more holistic approach that encompasses geopolitical awareness and social responsibility as essential components of long-term strategic planning.

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