For much of the late 20th and early 21st centuries, the global economy (as well as society) appeared to have discovered a formula for taming volatility and self-stabilising.
Commonly referred to as the Great Moderation—an era of more or less subdued inflation, steady growth and assumed mastery of business cycles—it almost assured business leaders and investors alike to regard risk as something that could be comprehensively measured, priced and diversified away.
The prevailing mood was one of technocratic confidence: central banks could manage shocks, markets could self-correct and globalisation would smooth the edges of political conflict.
Yet the apparent serenity masked profound structural imbalances. The crisis of 2008 marked the beginning of what might be called the Great Unraveling, a period in which the assumptions of the previous age ceased to hold. The subsequent decade witnessed populist politics, the erosion of multilateralism, technological nationalism and, not least, the systemic exogenous shock of the Covid-19 pandemic. Not least, capital, once viewed as apolitical and frictionless, has become entangled in the geopolitics of power.
The G-0 world
The structure of international affairs has likewise shifted. The bipolar logic of the Cold War yielded to a brief unipolar interlude in which the United States stood unchallenged. That period, too, has ended. What now confronts us is neither multipolarity in any stable sense nor a restoration of hegemony, but a diffuse and unstable non-polarity.
Political scientist Ian Bremmer has aptly described this as the G-0 world—a system without a clear hierarchy of power, in which leadership is contested, alliances are fluid and coordination is the exception rather than the rule.
Overall, as has arisen in my talks with business leaders, it means the realm of Knightian uncertainty of incalculable ambiguity is at least partially displacing the realm of calculable risk. The former cannot be fully captured in a spreadsheet: it arises from complex systems whose behaviour is non-linear and whose tipping points are unpredictable. Geopolitical shocks, social unrest, cyber warfare and environmental crises interact in ways that defy quantification. In this context, the distinction between financial analysis and political foresight collapses.
Facing new realities
Contemporaneously, the world of the Great Moderation has receded if not ended. In its place stands what may be considered a far less orderly and more ambiguous system, one in which the old certainties have eroded and where tail risks appear with a leptokurtic regularity.
Indeed, it may be said that the economic calm in which methods and approaches were formed has partially revealed itself to be a historical anomaly. What has emerged instead is a global order characterised by fragmentation, strategic rivalry and a wider distribution when it comes to both the levels and nature of risks.
For the family businesses and family offices I have spoken with—particularly those in the United States whose investment ethos tend to focus on long term, low-liquidity alternative assets that depend on asymmetric information—this transformation cannot be ignored.
More generally, both family offices and family businesses are a particularity to this new landscape because their natural strengths, deriving from longer time horizons and greater flexibility, can easily become weaknesses as uncertainty increases because the mean reversion one associates with normal distributions may not be on the table.
Consequently, wealth preservation, succession planning, business planning and investment governance now imply also assessing geopolitical risk, qualitative scenario planning and capturing as much insight as possible.
Resilience as a strategic imperative
The traditional discipline of risk management begins with the identification of hazards, proceeds to measurement and focuses on mitigation.
It presupposes that the world is knowable and that probabilities, however uncertain, can be assigned to most things. Yet when the system itself is in flux—such as when the parametres of political order are shifting—such an approach can, if not by blind luck, only produce significant residuals between itself and reality.
In such scenarios, which are best identified beforehand, what matters most is not the likelihood of an event but the capacity to absorb its impact, recover from it and, potentially, prove anti-fragile to it. Geopolitical risk is not only an additional perspective but a fundamental building block to scenario planning and strategy selection.
Furthermore, resilience, in this sense, is not merely the ability to survive shocks but to adapt creatively to them. It requires governance structures that are nimble, investment processes that integrate scenario thinking and, not least, decision makers who understand that the future cannot be wholly forecast but can be planned for in multiple scenarios.
For multi-generational families, whose wealth is intended to endure across cycles and crises, that resilience becomes a strategic imperative.
Photo: Dreamstime.
