Business Model Transformation and Government Affairs

Welcome to Inside Corporate Affairs, where we discuss the latest developments and best practices in achieving corporate affairs excellence. In this edition, China's DeepSeek faces a global backlash, but how does this influence strategic communications? EU policymakers clash over NGO lobbying - what impact will this have on policy engagement? And as CEO turnover reaches a record high in 2024, what role do activist investors play in forcing leadership transitions? All of this and more, with our focus of the week - business model transformation and government affairs.

This Week in Corporate Affairs

• China's DeepSeek Faces Global Backlash
• EU Policymakers Clash Over NGO Lobbying
• CEO Turnover Reaches Record High in 2024

China's DeepSeek Faces Global Backlash

Chinese AI startup DeepSeek has quickly emerged as a major player in the AI landscape with its open-source large language model, DeepSeek-R1. Launched in January 2025, the model quickly outpaced OpenAI’s ChatGPT in downloads, gaining traction due to its cost-effectiveness and lower computing requirements. However, the company now faces global scrutiny over data privacy and security concerns, leading to bans and restrictions in Australia, India, Italy, South Korea, Taiwan and the US. The backlash against DeepSeek underscores the geopolitical tensions surrounding AI. Western governments have raised concerns over China’s role in AI development, citing national security risks and potential data misuse. This reflects a broader trend of technological decoupling between China and Western nations, potentially leading to separate AI ecosystems. Corporate affairs leaders must recognise how regulatory scrutiny and digital sovereignty concerns could impact market access and operational strategies.

For businesses, DeepSeek’s low-cost, high-performance AI model signals a disruptive shift in AI competitiveness. European tech firms could leverage this moment to innovate and expand their AI capabilities. Meanwhile, US policymakers face mounting pressure to support domestic AI firms without stifling competition. Leaders should closely monitor AI regulations as governments tighten controls on foreign technology. Meanwhile, AI developers should leverage corporate affairs, enhancing investor confidence by clearly communicating product pipeline and emphasising innovation, security, and ethical AI practices to support stakeholder trust.

EU Policymakers Clash Over NGO Lobbying

A fierce debate has erupted in the European Parliament over whether the European Commission should fund organisations that lobby EU institutions. The dispute, led by right-wing policymakers, initially targeted environmental NGOs but has now broadened to include think tanks, business associations, and civil society groups. The controversy was reignited when Monika Hohlmeier, a centre-right MEP and chair of the Parliament’s budgetary control committee, raised concerns over a €15 million grant program allocated to green NGOs under the LIFE fund. She accused the Commission of effectively paying these organisations to lobby EU policymakers in support of the Green Deal agenda, prompting calls for a review by the Internal Audit Service. In response, a coalition of environmental NGOs, known as the Green10, is preparing to push back against what they describe as an attempt to silence civil society.

The scrutiny has now widened beyond environmental groups. Transparency International, an anti-corruption NGO, has also come under review after criticising the EPP’s alleged conflicts of interest. Nicholas Aiossa, the organisation's EU director, compared the actions of right-wing MEPs to Hungary’s restrictive approach to NGOs, calling it a “vendetta against civil society.” This escalating battle highlights the increasing politicisation of NGO funding and the growing scrutiny of public-private engagement in policymaking. The controversy signals a shift towards greater transparency requirements. As the debate unfolds, corporate affairs leaders engaged in EU policy advocacy should anticipate potential changes in funding rules and adjust their engagement strategies accordingly.

CEO Turnover Reaches Record High in 2024

2024 saw an unprecedented level of CEO turnover, with 202 chief executives departing their roles—a 9% increase from the previous year and well above the six-year average of 186. The sharp rise in leadership changes is driven by a combination of activist investor pressure, technological disruption, and an increase in planned successions as companies rethink their leadership strategies. A key driver of these departures was the growing influence of activist investors, with 27 CEOs forced out or resigning under shareholder pressure. This figure is nearly three times higher than in 2020, highlighting investors’ diminishing patience with underperformance. The technology sector experienced the most turbulence, recording 40 CEO departures, a 90% increase over previous years. This turnover reflects the fast-paced evolution of artificial intelligence and shifting market conditions that demand new leadership capabilities.

Additionally, short CEO tenures have become a defining trend, with 43 executives leaving their roles within three years of appointment—the highest since 2018. Meanwhile, planned successions accounted for 22% of CEO exits, indicating that boards are taking a more proactive approach to leadership transitions. For corporate affairs leaders, these trends underscore the growing need for strong stakeholder management, succession planning, and communications strategy. The volatility in executive roles signals heightened scrutiny of leadership, requiring businesses to ensure smooth transitions while maintaining stability in public and investor relations. With leadership expectations continuing to evolve, corporate affairs functions will play a key role in managing reputation amid ongoing change.

Taking Strategic Action in Corporate Affairs

Taking strategic action is essential in corporate affairs. It empowers leaders to proactively respond to challenges and opportunities, and helps to ensure organisations remain agile in and responsive to a dynamic policyscape. It enables professionals to navigate complex regulatory change, manage crises effectively, and position themselves as industry leaders. Are you ready to take your corporate affairs leadership to the next level? If so our Corporate Affairs Senior Leader Coaching Programme may be a good fit for you.

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Business Model Transformation and Government Affairs

The pace of business transformation has never been more rapid or disruptive. From the rise of platform-based businesses to the emergence of the circular economy, organisations across industries are fundamentally reshaping how they create, deliver, and capture value. As businesses redefine their business models, they often push into regulatory gray areas, where policies have yet to catch up with innovation. In this environment, government affairs teams must evolve beyond their traditional roles, developing new capabilities and becoming strategic partners within the business to help their organisations succeed. In this article I’ll explore how government affairs functions can and must adapt to support business model transformations. From understanding the forces driving these changes to restructuring teams, and developing new capabilities, I’ll examine best practices that help the government team establish itself as a proactive force in securing long-term competitive advantage.

Why Business Model Transformation Matters

To effectively align government affairs with evolving business models, it is essential to first understand what constitutes a business model transformation and the forces driving such changes. A business model defines how a company creates, delivers, and captures value. It encompasses everything from revenue generation to customer engagement strategies and operational structures. When these elements undergo significant shifts, a business model transformation occurs, often as a response to technological innovations, regulatory changes, or evolving consumer preferences.

Industries across the board are undergoing profound transformations. In the automotive sector, traditional car manufacturers are shifting from selling vehicles outright to offering mobility-as-a-service through subscription-based or ride-sharing models. In retail, digital transformation has accelerated the move from brick-and-mortar stores to e-commerce. Meanwhile, in manufacturing, companies are adopting circular economy principles, where waste is minimised, and products are designed for reuse and recycling. These shifts are not just operational adjustments, they fundamentally alter how businesses interact with markets, customers, and regulators.

Several key drivers underpin such transformations.

• Technological Advancements: Innovations in technology such as artificial intelligence, blockchain, and the Internet of Things (IoT) have enabled companies to reimagine traditional business processes, automate decision-making, and enhance customer experiences.
• Consumer Behaviours: Shifts in consumer behaviour also play a role, with a growing preference for digital-first experiences, on-demand services, and sustainable products. Companies must adapt their business models to meet these new expectations.
• Regulatory Pressures: Changes in regulations accelerate change. Industries like energy and financial services face increasingly stringent compliance requirements that compel businesses to adopt new models to remain viable.
• Competitive Pressures: The need to stay competitive also drives transformation, as companies that fail to innovate risk being left behind by more agile and digitally savvy competitors.

Understanding these transformations helps government affairs leaders anticipate the regulatory challenges and opportunities these changes might present. Whether advocating for policy updates, ensuring compliance with emerging regulations, or fostering industry partnerships, a forward-thinking government affairs strategy must be deeply intertwined with a company’s evolving business model.

The Evolving Role of Government Affairs

As business models transform, the role of government affairs must also evolve to effectively support and advance an organisation's new strategic direction. Traditionally, government affairs teams were seen as primarily reactive, but in today’s business environment, their role is expanding into a more strategic function—one that not only ensures regulatory alignment but also actively shapes policy, mitigates future risks, and creates opportunities for growth. Companies that fail to integrate government affairs into broader strategic planning risk being caught off guard by regulatory changes that disrupt operations or erode competitive advantage.

Focus Areas: When government affairs teams are embedded in strategic discussions, they can identify risks and opportunities early, ensuring that business decisions are aligned with the policyscape. Effective government affairs also requires a multi-channel approach—leveraging traditional lobbying, media engagement, digital advocacy, and CSR initiatives to build trust and support.

• Strategic Integration: Government affairs teams need to be deeply integrated with the strategic planning units of a company. This integration ensures that regulatory considerations are factored into business decisions from the start.
• Innovation Advocacy: As companies innovate, government affairs is tasked with advocating for a regulatory environment that nurtures and protects new business ventures. This includes working to minimise bureaucratic hurdles that could stifle innovation and advocating for policies that support industry growth.
• Stakeholder Engagement: The scope of stakeholder engagement broadens significantly. It's no longer just about engaging with traditional political stakeholders, but also with a wider array of community leaders, regulatory bodies, non-governmental organisations, and the public. Each of these groups can have a profound impact on how new business models are received and regulated.

Key Activities: One of the most significant shifts is the need for proactive engagement rather than reactive compliance. Government affairs teams must anticipate developments and influence them. This requires early involvement in policy discussions, active participation in industry coalitions, and ongoing dialogues with regulators.

• Proactive Policy Influence: Engage with policymakers during the early stages of legislative development to influence outcomes that favour your business. This involves providing expert insights, data, and potential impact assessments to help shape informed policies.
• Enhanced Communication Strategies: Develop sophisticated communication strategies that articulate the benefits of new business models, not only to regulators but also to the public, aiming to build broad-based support for the company’s innovations.
• Crisis Management and Response: Equip the team to handle regulatory crises that may arise from misunderstandings or conflicts between business operations and public policy. This includes rapid response capabilities and pre-emptive action plans to manage potential fallout effectively.

Additionally, the skills required for government affairs professionals are evolving. While traditional lobbying and regulatory expertise remain important, the modern government affairs function increasingly demands proficiency in data analytics, geopolitical risk assessment, strategic communication, and even digital marketing. The ability to craft compelling narratives, use data-driven policy arguments, and navigate complex global regulatory environments is becoming essential. Companies must invest in upskilling their teams, ensuring that they have the expertise to address emerging challenges effectively.

Ultimately, the evolving role of government affairs is about transitioning from a compliance-focused function to a strategic enabler of business success. By aligning more closely with corporate strategy, engaging stakeholders in more sophisticated ways, and proactively shaping the policyscape, government affairs teams can support successful business transformation.

Realigning Strategy

As companies implement significant transformations in their business models, the strategic realignment of government affairs becomes essential to ensure these changes are supported by adaptive regulatory strategies and robust stakeholder relationships. This realignment takes the form of a four step process, which should focus on integrating government affairs more deeply into corporate strategy, aligning goals, and ensuring that government affairs activities are proactive rather than reactive.

Step 1 – Aligning with Corporate Objectives

• Integration with Leadership: Ensure that government affairs leaders are involved in strategic discussions at the highest level, offering insights into how governmental and regulatory factors can impact corporate objectives.
• Shared Vision: Develop a shared vision that includes understanding new business directions and the corresponding changes needed within government affairs to support these directions effectively.

Step 2 – Identifying Key Regulatory Drivers

• Regulatory Mapping: Conduct a thorough mapping of existing and potential regulatory issues that impact your new business model. This should include identifying key geographies, regulatory bodies, and potential policy shifts.
• Impact Analysis: Assess the impacts of these regulatory factors on your business to prioritise government affairs activities and resources effectively.

Step 3 – Developing Proactive Advocacy Plans

• Pre-emptive Policy Engagement: Design strategies for early engagement in policy discussions that are likely to affect the business. This involves proactive lobbying, participating in policymaking processes, and leading industry coalitions to shape favourable regulatory outcomes.
• Scenario Planning: Use scenario planning tools to anticipate potential changes in the political and regulatory environment and prepare strategic responses that align with corporate goals.

Step 4 – Enhancing Communication and Messaging

• Consistent Messaging: Develop clear and consistent messaging that explains the company’s new business model and its benefits to various stakeholders, including regulators, policymakers, customers, and the community.
• Campaigns and Outreach: Implement targeted communication campaigns to build public and political goodwill towards the company’s innovations and business strategies.

Challenges in Strategy Realignment: Overcoming challenges in strategic realignment supports teams in remaining agile, proactive, and aligned with evolving business objectives.

• Resistance to Change: Internal and external resistance to strategic changes can impede the realignment process.?Comprehensive stakeholder engagement can help in managing resistance, educating stakeholders about the benefits of the new business model, and garnering support.
• Resource Allocation: Adequate resources may not be immediately available to support a strategic shift in government affairs.?Prioritise resource allocation based on the areas of highest regulatory impact and potential risk to ensure that the most critical areas are supported.
• Keeping Pace with Change: The speed at which business models and regulatory environments change can outpace the ability of government affairs to adapt. Foster a culture of continuous learning and agility within the government affairs team, encouraging ongoing professional development and rapid adaptation to changes.

By realigning the government affairs strategy to be more integrated and proactive, leaders can better overcome the challenges associated with changing business landscapes. This strategic realignment not only supports compliance with current regulations but also positions your business to influence future legislative developments and secure a competitive edge in the marketplace.

Assessing the New Policyscape

As businesses evolve, the political and policy environments in which they operate also undergo significant shifts. Changes in government leadership, regulatory priorities, geopolitical tensions, and public opinion can all have profound impacts on a company’s ability to operate and grow. For government affairs teams, the ability to assess and navigate this evolving policyscape is key. Without a clear understanding of political and policy trends, businesses risk being caught off guard by sudden regulatory changes, policy reversals, or shifts in enforcement priorities that could disrupt operations or limit growth opportunities.

The first step in assessing the new policyscape is to establish a comprehensive monitoring and intelligence system. This includes tracking legislative developments, regulatory proposals, political leadership changes, and emerging policy debates at the local, national, and international levels. Effective monitoring demands active engagement with policymakers, industry groups, and think tanks to gain early insights into policy shifts. Companies that stay ahead of these changes can adjust their strategies in real-time, allowing them to seize opportunities or mitigate risks before they materialise.

Political risk assessment is another essential component to this. Understanding how geopolitical developments and domestic political dynamics influence regulatory decisions enables businesses to anticipate challenges before they arise. For instance, trade policies, foreign investment restrictions, or changes in tax regulations can have immediate and long-term impacts on operations. Similarly, political shifts—such as an election that brings a new administration with different regulatory priorities—can alter the playing field overnight.

Beyond monitoring and risk assessment, companies must also engage in stakeholder mapping and influence analysis. Identifying the key policymakers, regulatory bodies, advocacy groups, and public influencers who shape the legislative agenda is critical for effective engagement. Government affairs teams must determine who the decision-makers are, what their priorities and concerns might be, and how best to engage with them. This includes analysing not just formal regulatory authorities, but also grassroots movements, NGOs, and media influencers, all of whom can play an increasingly important role in shaping public policy.

Another key consideration is the growing role of regulatory enforcement and compliance. In some jurisdictions, even if laws do not change, enforcement priorities may shift, creating new compliance risks. Government affairs teams must work closely with legal and compliance functions to ensure that businesses are not only aware of explicit regulatory requirements but also of unwritten expectations and evolving enforcement trends.

Finally, businesses must adapt their engagement strategies to changing political norms and public sentiment. Policymakers today are more sensitive to public perception, making corporate reputation and responsible governance critical elements of regulatory engagement. Assessing a new policyscape requires a mix of data-driven analysis, stakeholder engagement, and strategic planning. Companies that take this approach will be able to anticipate regulatory changes, proactively shape policy discussions, and ensure that their business models remain resilient in an unpredictable political environment.

Restructuring the Function

As businesses adapt to new models and the policyscape evolves, the structure of the government affairs function may also need an overhaul to better align with the new strategic requirements. Restructuring the function involves redefining roles, realigning responsibilities, and optimising resources to enhance the team’s effectiveness.

Assessing Current Structure: Evaluating the existing government affairs setup is essential to identify gaps, inefficiencies, and misalignments that could hinder your organisation’s ability to engage across the policyscape.

• Evaluation: Conduct a comprehensive assessment of the current government affairs function, analysing how well it aligns with the company’s transformed business model and objectives.
• Identifying Gaps: Identify gaps and inefficiencies in the existing structure that could hinder effective engagement with policymakers.

Defining New Roles and Responsibilities: Establishing clear roles ensures that government affairs teams have the expertise and focus needed to address emerging policy challenges, engage key stakeholders, and align regulatory strategies with business objectives.

• Role Redefinition: Redefine roles within the government affairs team to address new business needs and ensure that all critical areas are covered.
• Specialisation: Consider introducing specialised roles that focus on high-priority areas, depending on your business model and industry.

Centralising vs. Decentralising: Determining the right balance between centralisation and decentralisation allows companies to maintain strategic consistency while ensuring localised flexibility to engage with policymakers and regulatory bodies across different jurisdictions.

• Centralised Approach: Evaluate the benefits of centralising the function to maintain consistency in messaging and strategy across all regions and departments.
• Decentralised Approach: Alternatively, consider decentralising government affairs to allow for more localised and agile responses to regulatory and political challenges, especially in geographically diverse operations.

Integrating with Other Departments: Enhancing communication between government affairs and other departments improves cross-functional collaboration, supporting a coordinated approach to policy engagement and risk management.

• Cross-functional Teams: Promote closer integration with other departments such as legal, compliance, and strategic planning to ensure a unified approach to external engagements and policy advocacy.
• Collaboration Mechanisms: Implement mechanisms for regular communication and collaboration between government affairs and other functions to align strategies and share insights.

Changes in structure can often meet with resistance from within the team or other parts of the organisation, so clearly communicate the benefits of change, involve team members in the planning process and provide support during transitions. Ensuring that local or regional activities align with global strategies can also be challenging in a decentralised structure. This can be addressed by developing a joint strategic framework that provides guidance while allowing flexibility for local adaptation. By thoughtfully restructuring the government affairs function, organisations can enhance their capacity to respond effectively to issues introduced by new business models. This strategic alignment enables the function to not only defend against potential risks but also seize opportunities that arise from regulatory change.

Developing New Government Affairs Capabilities

Alongside changing business models, is often a need to develop new government affairs capabilities. Enhancing these capabilities ensures that teams can effectively influence policy, manage stakeholder relationships in a changing policyscape. To identify capability needs, perform an analysis to identify gaps in current capabilities that could hinder the effectiveness of the function under the new business model. This should include a review of skills, knowledge, tools, and processes.?Also forecast future needs based on anticipated changes in the business environment and the policyscape. This planning should consider emerging technologies, geopolitical shifts, and industry-specific regulatory shifts.

Strategies for Capability Development: Effective strategies for capability development are essential to ensure that government affairs teams have the skills, knowledge, and tools needed to proactively engage across the policyscape, influencing policy discussions and aligning advocacy efforts with the organisation's long-term strategic goals.

• Training and Coaching Programmes: Implement targeted training programmes designed to upskill team members in specific areas such as digital literacy, data analytics, and regulatory affairs. These programmes should be regularly updated to reflect the latest developments and best practices.
• Hiring Specialists: Where training existing staff is insufficient, consider hiring specialists with expertise in critical areas that support the new strategic direction of the business.
• Partnerships and Collaborations: Establish partnerships with academic institutions, industry associations, and professional training organisations to provide external expertise and resources for capability development.
• Mentorship and Cross-Training: Promote mentorship programmes and cross-training opportunities within your organisation to foster a culture of continuous learning and knowledge sharing.

It is also important to regularly assess the effectiveness of capability development initiatives through feedback mechanisms and adjust programmes as necessary to maximise their impact. Ensure adequate resources are allocated to capability development, recognising that these investments are critical to the long-term success of the function. By systematically developing new capabilities within the government affairs team, organisations can ensure that their function is not only responsive to current challenges but also well-prepared to manage future developments effectively. This strategic investment in capability building is essential for maintaining a proactive and influential presence in the policy space.

Factors Impacting Performance

As businesses manage shifting business models, government affairs teams must consider several strategic factors that can impact their performance. One of the most significant factors is globalisation and the need for a localised approach to regulatory engagement. As businesses expand internationally, teams must navigate vastly different political climates, cultural expectations, and regulatory frameworks. While a centralised government affairs strategy ensures consistency, it must also be flexible enough to accommodate local market conditions. Successful organisations invest in regional policy experts and localised engagement strategies to maintain credibility and agility across varying policyscapes.

Another consideration is the growing importance of sustainability and CSR. Governments worldwide are making sustainability a core part of corporate-government engagement. Government affairs teams must collaborate with sustainability and CSR leaders to ensure compliance while also shaping industry discussions on policy. Engaging proactively with regulators on topics such as supply chain transparency, and circular economy policies can help teams position their function as a leader, reinforcing newly established business models.

The digital transformation of policy advocacy is another key consideration. The rise of social media, digital lobbying tools, and AI-driven policy analysis is changing how government affairs teams operate. Digital platforms now play a significant role in shaping public opinion, and policymakers increasingly rely on data-driven insights to develop regulations. Companies must invest in digital advocacy strategies, AI-powered policy monitoring systems to stay ahead of political and regulatory trends.

At the same time, public expectations around corporate engagement in policy issues are evolving. Consumers, employees, and investors are increasingly holding businesses accountable for their positions on social and political issues. Government affairs teams must manage the balance between business interests and CSR. Remaining silent on key debates can be seen as passive complicity, while overly aggressive lobbying can lead to reputational risks. Companies should establish clear policy engagement principles that align with their corporate values and stakeholder expectations, ensuring transparency in their advocacy efforts.

By incorporating these broader considerations into government affairs strategies, companies can build a function that is resilient, adaptive, and aligned with corporate objectives. As the intersection between business, policy, and public perception continues to evolve, government affairs teams that embrace these factors will be better positioned to drive long-term success.?

Conclusion

In the face of rapidly evolving business models and the corresponding shifts in the policyscape, government affairs functions must adapt to stay effective and relevant. The transformation of business models necessitates a corresponding transformation in how government affairs teams operates—ranging from rethinking strategic alignments and restructuring teams to developing new capabilities and implementing best practices. As organisations continue to evolve and adapt to new market conditions, so too must their approach to government affairs. By remaining proactive, resilient, and strategically aligned with the broader corporate objectives, government affairs teams can continue to play a pivotal role in managing regulatory challenges, shaping public policy, and driving business success.

Leadership Takeaways

• Leaders must shift from reactive lobbying to proactive policy engagement to influence regulatory environments that impact evolving business models.
• Integrating government affairs into corporate strategy ensures that regulatory considerations are embedded in decision-making from the outset.
• Leaders must invest in regulatory intelligence and scenario planning to anticipate policy shifts before they create compliance challenges.
• Government affairs leaders must participate in high-level strategy discussions to align advocacy efforts with corporate objectives.
• Effective government affairs includes relationship development with regulators, industry groups, NGOs, media, and the public to build broader support for business initiatives.
• Government affairs teams must develop rapid response plans for regulatory crises to protect business continuity and corporate reputation.
• Leaders must determine whether a centralised or decentralised government affairs structure best supports their business model across multiple jurisdictions.
• Continuous investment in skills strengthens the effectiveness of government affairs teams.
• Close coordination with other departments improves alignment and supports a more effective approach to government affairs.
• In a fast-changing policyscape, leaders must foster a culture of resilience, agility and professional development to maintain regulatory leadership.?

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