Ep. 343: Srividya Jandhyala on Changing Corporate Behaviour to Geopolitical Risks, and more...

For decades, the prevailing narrative in global business was one of borderless expansion. Fueled by the promise of globalization, companies operated under the assumption that the world was flattening, markets were opening, and commerce would trump conflict. That era is definitively over. Today, executives are navigating a landscape where geopolitics is no longer just a background noise—it is a primary driver of corporate strategy.

Srividya Jandhyala, Associate Professor at ESSEC Business School and author of The Great Disruption: How Geopolitics Is Changing Companies, Managers, and Work, argues that the old playbooks for international business are obsolete. In a recent conversation with Macro Hive, Jandhyala explored why companies must stop treating geopolitical risks as isolated events and start viewing them as structural shifts that demand a fundamental operational overhaul.

Key Takeaways

• From Events to Structure: Geopolitics can no longer be managed as a series of ad-hoc crises; it requires a permanent, structural change in corporate strategy.
• The "Tailwind to Headwind" Shift: In the 1990s, global politics opened doors; today, national security concerns and protectionism act as friction against growth.
• Nationality Trumps Product: A company’s country of origin is now a decisive competitive factor, occasionally mattering more than price or product quality.
• The Jenga Effect: While companies can manage supply chain shocks, the erosion of institutional norms (legal recourse, payment systems) threatens the stability of the entire global business model.

Moving Beyond the "Event-Response" Model

Traditionally, multinational corporations have managed geopolitical risk through a reactive lens. A tariff is announced, a conflict breaks out, or a sanction is imposed, and the company responds to that specific event. Jandhyala argues that this approach is dangerously insufficient because it ignores the "long tail" of geopolitical shifts.

Events are merely the flashpoints. The real impact lies in the second-order effects that reshape the business environment long after the headlines fade. For example, a conflict might eventually cease, but the resulting changes—such as shifts in payment systems, altered property rights, or new information-gathering restrictions—often remain permanently.

Relying solely on events makes us underestimate the actual impact... Events tend to have a long tail. They tend to reshape how we think about certain risks or how we evaluate a given environment.

To survive, organizations must pivot from crisis management to structural adaptation. The question is no longer "How do we handle this sanction?" but rather "How do we operate in a world where access to this market is permanently conditional?"

The End of the "Flat World" Playbook

Many of today’s senior executives came of age during the 1990s and early 2000s, a period characterized by liberalization and market integration. During this time, geopolitics largely acted as a tailwind—politics was the force opening new territories for investment. The primary challenges for managers were operational: adapting products to local tastes or managing remote teams.

Today, geopolitics acts as a headwind. The same political forces that once facilitated expansion are now erecting barriers. National security has eclipsed economic efficiency as the priority for governments worldwide, forcing companies to jump over increasingly high hurdles to maintain market access.

This shift has exposed a skills gap in the C-suite. Executives trained to read financial statements and optimize marketing funnels are now required to act as diplomats and grand strategists—skills that were rarely part of the business school curriculum during the globalization boom.

Corporate Nationality as a Competitive Moat

One of the most profound shifts in the current landscape is the resurgence of corporate nationality. In a globalized economy, the goal was often to be a "stateless" multinational. Today, where a company is domiciled can determine its viability.

Jandhyala notes that corporate nationality can now override product characteristics. A superior product may fail not because of price or quality, but because its origin country is politically disfavored. Conversely, a less efficient competitor may thrive simply because it possesses a "favorable" nationality.

The Airline Arbitrage

A stark example of this dynamic is visible in the aviation sector. Following the onset of the conflict in Ukraine, Western carriers were barred from Russian airspace, forcing them to fly longer, costlier routes between Europe and Asia. Chinese carriers, however, retained access to Russian airspace.

The result is a market distortion based purely on geopolitics. A passenger flying from London to Beijing might choose a Chinese carrier not for better service or seats, but because the flight is hours shorter and significantly cheaper. In this instance, corporate nationality provides a tangible, structural cost advantage that no amount of operational efficiency by Western carriers can overcome.

The Institutional "Jenga Tower"

When discussing geopolitical risk, the conversation often defaults to supply chains. While supply chain resilience is critical, Jandhyala suggests it is actually one of the more manageable aspects of the current crisis. Companies are adept at finding workarounds and alternative suppliers when bottlenecks occur.

The more dangerous threat is the erosion of the institutional framework that underpins global trade—the "soft infrastructure" of dispute resolution, intellectual property enforcement, and financial transaction systems.

I like to use the analogy of a game of Jenga. You take blocks, you stack them up... As you knock more blocks out, the tower starts becoming a bit wobbly, and then at some point it becomes one too many and the whole tower crashes.

Global business relies on the assumption that contracts will be enforced and that neutral arbitration is possible. If a company invests billions in a foreign market, they need assurance that a dispute can be resolved fairly, perhaps in a neutral venue like London or Singapore. However, if the losing party refuses to honor the arbitration award—and their home government supports that refusal—the rule of law breaks down.

When these institutional blocks are removed—when payment systems fragment or legal protections vanish—the cost of doing business becomes prohibitive, regardless of how robust the physical supply chain might be.

Strategies for Adaptation

How should companies respond to this fragmentation? The sectors that are adapting best are often those with long histories of political exposure, such as oil, gas, and mining. These industries have always understood that they operate by virtue of a "societal license."

Tech and e-commerce giants, which previously scaled by bypassing physical borders, are now having to learn these lessons rapidly. Two primary strategies are emerging:

1. Deep Localization: It is no longer enough to simply hire local staff. Companies must align their corporate interests with the strategic goals of the host government. For example, MG Motors in India navigated geopolitical tensions by aligning deeply with the "Make in India" manufacturing initiative, transforming their identity from a foreign entrant to a local contributor.
2. Jurisdictional Maneuvering: Some firms, particularly those facing scrutiny due to their origins, are relocating headquarters to neutral jurisdictions like Singapore. While this does not solve all problems, it attempts to leverage the legal and reputational shield of a neutral third party.

Conclusion

The era of separating business from politics has ended. As Srividya Jandhyala’s research highlights, we are moving toward a world where the "rules of the game" are fragmented and corporate nationality is a defining characteristic of commercial success. For investors and managers, the challenge is to look past the daily headlines and understand the structural erosion of the global order—before the Jenga tower falls.

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