A BOARD'S GUIDE TO THE U.S. ELECTION

? Strategic Boardroom Guide - A Board’s Urgent Agenda on Geopolitics and the 2024 US Election ?

Boards should anticipate significant shifts, given that the 2024 election will shape the US’s regulatory and foreign policy landscape, impacting both domestic and global economies. With the candidates divided on international diplomacy, economic alliances, and regulatory approaches, boards need to prepare for diverse potential outcomes, especially concerning economic policies toward China, NATO commitments, and regional conflicts.

1. What Boards Should Expect from the Upcoming US Presidential Election

The 2024 US Presidential election holds significant global implications. Boards should anticipate diverging approaches from the two leading political parties:

• Team RED (Republican): This administration may pursue a more assertive diplomatic stance, particularly in relation to China. Key focus areas include aggressive trade negotiations and possibly higher national defense budgets, which could reshape US-China relations.
• Team BLUE (Democrat): Expect a more consistent continuation of current foreign policies, with a preference for gradual diplomacy and collaborative international efforts. This could involve a more tempered approach to China and a focus on alliances, such as NATO. ??

Implications for the US Economy and Beyond:

• Domestic policies could vary widely in terms of fiscal stimulus and infrastructure investments, impacting sectors like technology, energy, and manufacturing.
• Internationally, policy shifts could affect everything from trade flows to supply chain stability, impacting multinational operations.

2. Planning for Uncertain Election Outcomes and Potential Economic Impacts

Given the uncertainties surrounding election results, boards should prepare for multiple scenarios, each with its implications for the US and global economies.

• Geopolitical Scenario Planning: Boards should engage in rigorous scenario analysis to outline possible election outcomes and map their operational impacts. Design strategies for potential market reactions, from volatility in capital markets to sector-specific impacts, notably in tech and manufacturing.
• Sectoral Impact Assessment: Review how potential policy changes may influence core sectors—such as technology, finance, and healthcare—and develop a framework to address economic shifts.
• Capital Allocation Strategy: Prepare to reallocate investments based on likely policy outcomes and expected changes in the regulatory environments.
• Investment Portfolio Adjustments: Assess implications for fixed-income portfolios and potential realignments in response to fluctuating interest rates and regulatory shifts.
• Crisis Management: Establish clear frameworks for rapid response, should market volatility affect liquidity, supply chains, or revenue streams.

3. Navigating Geopolitical Complexities: Board-Level Strategic Focus

Boards must understand the implications of US-China relations and shifting global alliances as they align their strategic decisions with this evolving reality.

• Legislation Balance: Evaluate the potential changes to US domestic and international regulations. Understanding the regulatory outlook under each potential administration can help boards anticipate compliance challenges and shifts in operational requirements.
• US-China Relations: Given China’s current economic landscape—characterized by slower growth, monetary policies to stimulate exports, and challenges in housing and supply chains—boards should consider the competitive advantages that advanced technology markets in #AI and #EVs offer.

Team RED may take a more aggressive stance, focusing on competition over technology and global influence, leading to possible regulatory constraints or sanctions.        

Team BLUE might focus on cooperative diplomacy, potentially easing supply chain tensions and sustaining existing market relationships.        

• Asian Markets: With robust growth projections in aerospace and civil travel from Asian markets, US and EU entities must remain vigilant. Asia’s projected sustainable growth, surpassing the EU by 2040, necessitates a focus on supply chain diversification and partnership development to mitigate geopolitical risk.
• NATO and Global Security Concerns: Different administrations have varying views on NATO's role in US security strategy. For example, Team RED might downplay NATO’s importance, whereas Team BLUE may reaffirm its support. Boards should prepare for impacts on industries tied to defense, trade, and regional alliances.

Board Perspectives on Managing Geopolitical Risk in the Boardroom

1. Why Boards Should Care About Geopolitics Geopolitical instability affects all business sectors. As global tensions rise, boards are urged to prioritize geopolitical risk management as a core competency, essential for safeguarding corporate interests.
2. Suggested Steps for Boards: Boards can reinforce their value-added resilience by considering the following steps:

• Stay Informed: Directors should be briefed regularly on geopolitical developments, engaging in forums and discussions to remain updated on global risks.
• Integrate Geopolitical Risk into Enterprise Assessments: Geopolitical risk should be incorporated into the company’s enterprise risk assessments; mapping how international events may disrupt operations or compliance requirements.
• Adopt a Value Chain Perspective: By evaluating the full scope of the value chain, boards can identify areas vulnerable to international disruptions and devise contingency strategies for supplier and production risks.
• Regulatory Adaptability: Boards must prepare for a dynamic regulatory landscape, where cross-border compliance becomes increasingly nuanced.
• Focus on Customer Impact: Assess how geopolitical events could affect customer trust and satisfaction. Supply chain issues or political tensions can disrupt customer experience, impacting brand loyalty and reputation.
• Address Escalating Risks: Be proactive about potential asset impairment, legal, credit, and reputational risks that may arise from political conflicts or regulatory shifts.
• Effective Crisis Management: In times of heightened geopolitical tension, boards should prioritize rapid response capabilities, enabling swift crisis management when risks materialize unexpectedly.
• Robust Communication Plans: Develop a clear communication strategy for both internal teams and external stakeholders, ensuring transparency and coordinated messaging during geopolitical disruptions.
• Examination on Surprises: Analyze unexpected geopolitical events post-occurrence to refine resilience strategies and prepare for future challenges.
• Play Both Offense and Defense: Boards should not only focus on mitigating risks but also seek new opportunities that arise from geopolitical shifts, such as expanding in emerging markets or investing in resilient sectors.

Key Election Considerations for Legal and Compliance Teams

1. Global Security and Supply Chains: Election results will shape US security priorities, impacting international trade and supply chain dependencies. Companies should evaluate how heightened security protocols or trade shifts may affect logistics and costs.
2. US Regulatory Leadership: The next administration’s approach will determine whether the US continues leading the global regulatory agenda. Boards should be prepared for evolving compliance requirements, particularly in finance, technology, and energy.
3. EU-US Relations: As the EU remains a major trade partner, changes in diplomatic or trade policies could disrupt transatlantic business operations. Teams should monitor EU-US alignment on issues like data privacy, climate regulations, and cross-border trade.
4. Impacts on Regional Conflicts and Sanctions: “Boards should prepare for shifts in the US stance on Ukraine and the Israel-Hamas conflict.” These developments could alter the sanctions landscape, affecting international market access and compliance.
5. Fixed-Income Portfolio Strategies: With the election approaching, market volatility may rise. Boards should ensure portfolio resilience by diversifying holdings and adopting defensive strategies in case of market disruptions following the election.

Positioning for Post-Election Stability

In this critical election year, maintaining a steady long-term perspective is essential. By staying proactive and adaptable, boards can enhance their organization’s resilience, ensuring preparedness amidst uncertain geopolitical realities and capturing growth opportunities as they arise.

"Bo" Subodh Dalvi , Board Director | Executive Advisor | Harvard Business Review ADVISORY COUNCIL | Impact●Investor |

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