“AI will amplify the fractures already at work between powers”

Thomas Gomart and Lucie Mielle, from the French Institute of International Relations (Ifri), sought to find out what the companies ranked in the Top 100 world market capitalizations fear. They have drawn up a “New geography of geopolitical risk”.

Your étude underlines how geopolitical risk for companies is not a variable in itself, but the result of a construction based on geographical elements?

Thomas Gomart : Companies now talk about geopolitical risk as being a central factor for them, but there is no commonly shared definition. Its perception is linked, in part, to the location of the company’s headquarters. American companies perceive geopolitical risk as a threat to their hegemony, and now give it priority. European businesses perceive it as a threat to the rule of law.

Chinese companies, unsurprisingly, align with the priorities of the Chinese Communist Party, but they are especially concerned about seeing their operations hampered by American sanctions, particularly in the financial area. Indian companies offer an example of singular geopolitical optimism. The large Indian petrochemical group Reliance Industries invites us to view risk not as a threat, but as an opportunity to reimagine the future.

Besides the location of the head office, what are the other criteria?

T. G. : The geography of locations and operations will have an impact, but there is another very important factor which is the shareholder base, often sensitive to reputational issues. Geopolitical risk became fashionable starting in 2019, mainly through American companies. These represented, in 2009, 38% of global stock market capitalization, at a time when the Americans were, basically, the most multilateralists.
 

“Geopolitical risk cannot be addressed globally. » – Thomas Gomart, director of Ifri
 

Now, they represent 75% of world capitalization, thanks to the giants of technology and finance, at a time when the United States is the most unilateralist. What we are trying to show in this report is that geopolitical risk cannot be addressed holistically. It must be analyzed through a triple geography, that of decision-making centers, operations and shareholding.

Just as an American company will not have the same perception of geopolitical risk as a Chinese or European company, an oil group will not have the same apprehensions as a pharmaceutical group or a technology company?

Lucie Mielle: For large pharmaceutical groups, for example, geopolitical risk can be seen in the resilience or otherwise of their value chains – we saw this with the Covid pandemic. But it also appears with the question of the sustainability of regulatory frameworks, since research by nature needs regulatory security over the long term.

With regard to large oil groups, the risk is mainly linked to infrastructure security. We see this with the blockade of the Strait of Hormuz and the targeting of refineries. Companies in the financial sector will feel threatened by the questioning of the fluidity of assets and even confidence in the financial system. They are particularly sensitive to the issue of secondary sanctions and the functioning of payment systems.

And for the high-tech sector?

L. M. : We are observing a fragmentation of the digital space, which is also seen as an opportunity by high-tech companies. Texas Instruments, for example, in its annual report, explicitly mentions being geopolitically reliable as a selling point. Its ability to bring its production back to the United States is now presented as a security argument.

Will the rise of AI change the perception of geopolitical risk?

TG: In the reports that mention AI, we find the idea that it is much more than a tool, because it will condition the hierarchy of powers and organizations.

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> Read the entire article on the Echos website.
 

> Read the study by Thomas Gomart and Lucie Mielle: “ What do businesses fear? New geography of geopolitical risk »