The global economy has entered a new phase. Long-standing assumptions about open borders, integration, and cooperation are being tested as governments reassess their dependencies and seek to assert greater influence over “critical” domains. Energy resources, technology, mineral inputs, defense capabilities, financial infrastructure, and data are now regarded as essential components of sovereignty and self-reliance.
These priorities are reshaping the operating environment for multinationals. Shifting security alliances, industrial policy frameworks, and investment screening regimes are redefining where capital flows and on what terms.
The advance of artificial intelligence offers unprecedented opportunities for value creation but raises a range of commercial, operational, and legal challenges. Globally, AI policy is increasingly influenced by the desire for AI sovereignty, impacting where and how AI capabilities, data and infrastructure are developed and deployed.
Cyber-attacks are more frequent and more devastating, reinforcing the need for operational resilience in an increasingly hostile environment. At the same time, the focus on energy security and shifting stances on sustainability and decarbonization are reshaping regulatory frameworks across jurisdictions, leaving global organizations to confront a labyrinth of divergent environmental, social, and governance obligations.
These powerful forces are interconnected and their disruptive effects are mutually reinforcing. Together they are upending the rules, norms, and assumptions under which business has long been conducted. Their influence has made the operating environment for multinationals more unpredictable, and the fundamentals of business life—transacting across borders, raising capital, investing, managing risk—more complex.
One of the primary mechanisms in which these economic, political, societal, and technological shifts are being expressed is through legal and regulatory change. Everything from financial standards to technology frameworks, corporate governance rules, and national security screening regimes are in flux as governments across the world compete for ways to boost domestic growth and capture emerging technologies.
In this more fluid, polarized environment, the choices executives face are more stark and more consequential. They also carry a multitude of legal and operational implications; some understood and expected, others unintended and unforeseen.
For business leaders, understanding the legal impact of sovereignty-driven policy is essential. Legal foresight—the ability to anticipate legal change and assess the cross-jurisdictional implications of business decisions—has become a crucial differentiator for boards and executive teams seeking confidence in their decision-making.
This type of forward thinking enables businesses to identify and exploit opportunities while mitigating the associated legal and regulatory ramifications. Leaders who integrate this analysis into their planning will be better positioned to turn market volatility into competitive advantage.
A new reality
Governments are deploying existing laws alongside new industrial policy measures and regulatory reforms in a bid to assert greater influence over a range of domains. The result is that the rules and standards surrounding core business activities are becoming more restrictive in some jurisdictions and more open in others—and are in a constant state of flux.
While some policy measures have an immediate effect (e.g., U.S. executive orders), others are a slower burn. Executives often cannot wait for greater market certainty, or for rulemaking to settle, before acting. This has made legal and geopolitical expertise more important than ever to board decision-making.
Choices made today carry overlapping consequences that must be managed to reduce friction. And as the world continues to fragment it is adding more sets of rules for global businesses to follow, creating new interactions and conflicting obligations that multiply the complexity of execution.
The drive for AI sovereignty
Nowhere is this change more evident than in relation to artificial intelligence, where policy and regulation are implemented in a sovereign battle for control of data, compute, talent and standards.
The U.S.—which alongside China is one of the world’s AI superpowers—is deregulating to boost innovation, fast-tracking the development of AI infrastructure, and focusing on “full stack” exports (everything from hardware to data centers and AI models) to seize the initiative in AI diplomacy.
Meanwhile, China’s state-directed strategy aims to integrate AI across all areas of its economy. The Chinese government has also spent decades building its control over the refining of critical minerals to secure its technology supply chain and gain leverage over its rivals.
Elsewhere, the AI “middle powers”, which include the UK, larger EU member states, Canada, South Korea and India, are pursuing “human-centric” pathways where technological advancement is balanced against trustworthiness and fundamental rights.
Against this backdrop, businesses are scrambling to control critical aspects of their AI capabilities. The desire for corporate AI sovereignty is driving strategic choices about where to invest, what to build, who to partner with, what to buy, and who manages and secures an organization’s data, intellectual property, and compute. These decisions unlock a business’s ability to innovate rapidly while protecting its core assets and customers from legal and commercial risk.
Critical decisions for turbulent times
To thrive in the period ahead, organizations must understand how legal and regulatory frameworks are evolving and be able to assess the legal ramifications of their strategic options across all the jurisdictions in which they operate. Law is almost always the real-life manifestation of political rhetoric, and periods of rapid change and technological advancement not only create opportunities for innovation and growth, but also raise new enforcement and litigation risks.
The businesses that succeed in designing self-reliant operating models will be those that can read the signals of change at an early stage, detect what threats and possibilities they present, and act to ensure they are positioned advantageously. To do this well, they must be able to analyze their decisions from every angle.
Take the example of a manufacturing company considering whether to reorient its choice of partners and operational footprint in response to geopolitical fragmentation and heightened tensions around critical minerals. Alongside the cost implications, any strategic analysis would need to factor in the impact of industrial policy and national security screening regimes in the relevant jurisdictions, as well as how to manage technology transfers across borders in light of possible export controls.
Understanding how to relocate key employees amid tougher immigration restrictions, and protect trade secrets that could be vulnerable during the transition, are equally critical, as are tax and payment dynamics and the implications of engaging with domestic versus foreign buyers when carving out and selling assets. Commercial and IP litigation are a live and significant threat.
In some emerging scenarios, making swift decisions can deliver a competitive advantage, particularly in relation to innovation efforts where no regulatory framework is yet in place. In others, moving first in response to change risks incurring unnecessary costs, losing strategic focus and becoming the test case for liability if something goes wrong. What separates the most effective boards and executive teams is the ability to assess which situations require an immediate response, and which do not.
Scanning the horizon and understanding the policy intent that lies behind regulatory development allows boards to map the consequences of their decisions and identify creative legal and regulatory solutions that support smooth execution and create networks and partnerships that are more resilient to macro developments. And in a world where it is impossible to anticipate every change, building the organizational proficiency to make the right moves in unexpected scenarios will deliver competitive advantage. Those that do this well will proceed with greater confidence than their competitors.
A continuing conversation
Today’s market volatility is not a temporary phenomenon awaiting resolution but a structural shift. Businesses need to understand how to operate in a world where alliances are conditional and rules are fluid.
This new environment is creating a series of inflection points where leaders are compelled to act; where new risks and opportunities are emerging that require board-level oversight; where re-revaluating current practices can build resilience, foster growth and drive innovation; and where reassessing corporate structures can reduce friction in international operations. These are the moments when informed legal thinking helps businesses to understand the implications of the choices they face and act decisively in response.
We have identified a series of scenarios—investment opportunities that must be seized, technological threats that must be mitigated, changes in regulatory frameworks that present new possibilities for growth and competitive advantage—where this thinking comes to the fore. They include:
- Investing in artificial intelligence.
- Exercising effective oversight of cyber resilience.
- Seizing investment opportunities in defense.
- Restructuring supply chains to address global fragmentation.
- Achieving antitrust approvals for necessary consolidation.
- Managing workforce transformation amid demographic shifts.
- Horizon-scanning for emerging litigation risks.
Over the coming months we will outline the key considerations for boards and executive teams that are confronting these issues and more.
Our insights are drawn from our work supporting the world’s leading businesses through this new, more unpredictable age. We will go beyond describing emerging issues to explore practical ways to de-risk complex challenges and grasp new opportunities.
Our aim is to start a conversation that will help business leaders navigate uncertainty with confidence—and build the organizational capabilities to find opportunity amid volatility.
