AI and Geopolitics: 70% of Global Business Leaders Face Rising Risks
70% of global business leaders see rising risk exposure due to AI disruptions and geopolitical instability, per a new KPMG report.
The global corporate landscape is facing a period of intense volatility. According to a new report by KPMG International, 70 per cent of business leaders worldwide have reported an increase in their organisations' global business risk exposure over the last two years. This surge in vulnerability comes at a time when the intersection of rapid technological evolution and geopolitical instability is redefining how companies operate.
The findings were unveiled during the 17th edition of ENRich, the flagship Energy and Natural Resources (ENR) conclave hosted by KPMG in India. The report, titled "Building a Shock-Resilient Supply Chain," warns that the modern business environment is increasingly susceptible to "cascading effects," where one crisis triggers another across the global value chain.
The AI Threat and Geopolitical Tension
While many view Artificial Intelligence as a tool for growth, it is also being viewed as a significant source of instability. A staggering 64 per cent of executives identified technology and AI disruption as the risk most likely to have the greatest impact on their businesses over the next two years.
Beyond the digital realm, physical and political borders are creating friction. The report highlighted the following primary concerns among leaders:
- Technology and AI Disruption: 64%
- Geopolitical Conflict: 58%
- Macroeconomic Uncertainty: 48%
Furthermore, 56 per cent of respondents believe that external disruptions—ranging from cyber threats and energy crises to climate-related risks and trade wars—will either cause severe operational failures or significantly drive up costs and hinder performance within the next three to five years.
Fragile Links in the Supply Chain
The report sheds light on exactly where businesses feel most vulnerable. Interestingly, the "digital" aspect of the supply chain is the weakest link, with 46 per cent of respondents citing technology and digital dependencies as their most exposed stage. This is followed by price volatility and delivered costs (39 per cent) and shipping and logistics (33 per cent).
KPMG points out that traditional risk management is often insufficient because risks do not happen in isolation. For instance, the report notes how the conflict in Iran and disruptions in the Strait of Hormuz have rippled through global energy markets, impacting everything from insurance and financing to industrial production and freight.
The report warns that even companies with diversified suppliers may remain at risk if those suppliers all rely on the same maritime chokepoints or financing channels.
A New Mandate for the Boardroom
Anish De, Global Head of Energy, Natural Resources and Chemicals at KPMG International, argues that resilience can no longer be relegated to a mid-level supply chain function. Instead, it must become a "board-level imperative."
"Resilience is no longer just a supply chain function, it has become a board-level imperative shaped by energy-linked disruption and a broader set of interconnected risks spanning technology, financial stability operations, and global value chains," De stated.
He urged organisations to abandon old assumptions regarding the design and operation of their supply chains and instead adopt a comprehensive enterprise resilience framework.
How Businesses are Fighting Back
To counter these threats, companies are turning to the very technology that causes them anxiety. The report found that 49 per cent of respondents are prioritising AI and predictive analytics to build resilience. Other strategies include:
- Scenario Planning and Stress Testing: Adopted by 44 per cent of leaders.
- Alternative Sourcing Strategies: Focused on by 39 per cent of respondents.
Despite the looming threats, there is a streak of optimism; 70 per cent of leaders expressed confidence in their ability to keep critical operations running during a major disruption. However, a significant gap remains in energy strategy, with only 28 per cent stating that energy security and resilience have become a primary strategic priority for their organisation.
Methodology
The insights in the "Building a Shock-Resilient Supply Chain" report are derived from KPMG International's Dynamic Risk Assessment (DRA) methodology, expert interviews, and a global pulse survey conducted by Ipsos. The survey included 109 senior executives from major global markets, including India, the United States, China, Japan, and Germany.