Tina Fordham: Never Going Back to Normal, Geopolitics and the Boardroom

In this episode of Governance Watch, Tina Fordham—founder of Fordham Global Insight and Wall Street’s first chief global political strategist—joins Gavin Hinks to explore why geopolitics is no longer background noise for business leaders. From the rise in global conflicts, tariffs, and sanctions to the U.S. global reset, Tina explains why boards need a new mindset, higher political quotient, and pragmatic optimism to navigate a world that’s never going back to normal.

Transcript

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Hello. My name is Gavin Hinks, and welcome to Governance Watch, the podcast about all things governance from board agenda. This episode is all about geopolitics and its relevance to boardrooms and corporate leadership. With us today, we're very privileged to have perhaps one of the leading experts in geopolitics and its relationship to be business, Tina Fordham, founder of the Fordham Global Insight Organization and Wall Street's first ever chief global politics strategist. Tina, we're really pleased to have you on the show. I know you've come straight from other media interviews ostensibly about the EU's emergency meeting over frozen Russian assets.

You're extremely busy at the moment. There's there's almost too much geopolitics around at this point in history.

Thank you very much for having me, Gavin. And and there certainly is more geopolitics about than, than any of us are used to. And I think, you know, as we hit the closing days of twenty twenty five, we can agree that that this year has been a real wake up call when it comes to the impact of geopolitics on c suite and business leadership decisions.

Yes. You that's one of the key arguments that you're making in your work at the moment. You've also said we're never going back to normal in terms of business and geopolitics.

Can you you flesh out for us what those two things mean?

Yes. Absolutely. The never going back to normal was the title of a research report that we, published in the middle of this year. And the the name of that report was actually inspired by in fact, the whole, approach of the report was inspired by repeated conversations that I was having mainly inside boardrooms where, you know, they'd invite me in to do a geopolitical overview, and then a kind of a fight would break out between board members, between the idea of whether geopolitical risks, were, were real or whether they were news or noise or kind of irrelevant to the board's process.

Because of, you know, seeing that dynamic emerge over and over again, I decided that we needed to create, something that's missing, frankly, from these discussions and from the literature on geopolitics, and that is an evidence base on geopolitical events. Now there is no uniform database, allow me to be technical here just very briefly, in the way that we have for interest rates or currency fluctuations or inflation or unemployment or the other kinds of traditional economic data. So what we did was look at five types of geopolitical risk events. One of the most prominent ones that came out in our research was the use of of tariffs and sanctions.

We looked at climate change. We looked at civil unrest. All the kinds of things you'd expect over a period between twenty ten, end of the global financial crisis, and end of twenty twenty four before Trump two point o. And what we established, and here's the punchline for your audience, is that even before president Trump returned to office for his second term, geopolitical risks had tripled in that period.

And it's just simple arithmetic. We can count them. And of those, tariffs and sanctions increased tenfold.

Cyber attacks, not cybercrime, state sponsored, also increased massively, which many of your members and and listeners will be familiar with, but also conflicts. And this, I think, you know, really throws a bucket of cold water on a lot of the assumptions and expectations that most people serving on boards, have been used to during the course of their career. And then this is what I'm writing in my forthcoming book. My fellow generation x, people, this is a huge disappointment. The world was supposed to be getting better. It was supposed to be integrating, homogenizing in terms of the rules based system, and that it we're not going back to that place. I think we will look back on the period between nineteen eighty nine and two thousand and eight as a golden age and not the baseline for future business strategy.

Disappointed indeed. I couldn't agree more with that being of that generation. At at the heart of your writing are two other concepts, denialism.

We did have the best music. I will I will say there, the unsurpassed, I think, the music of generation x, but we may have to console ourselves with that because our dreams are being shattered.

I couldn't agree more with that either.

At the heart of your work are two other concepts, which I think is worth, going over very quickly. You talk about denialism. I think you've touched on that, the business approach to these geopolitical risks. And also with the other thing I think you've touched on is your term, the super cycle. Just explain those for us very briefly.

Thank you. Well, geopolitical denialism was my term of the year for for the year that we're in now. It was in an interview published in Time Magazine.

And, you know, we did just talk about that and the fact that I think until really liberation day, it was possible to have that conversation about mean reversion and, you know, the idea that this too shall pass.

But since writing that report and since the, you know, seven or eight months since president Trump has been in office or sorry, eleven months, we've had a big wake up call, particularly corporates. Now in pure financial market terms, it's almost like nothing happened. You know? And the S and P is on track for a banner year.

Obviously, artificial intelligence investment has has kind of proven to be a huge fiscal stimulus. There are many good news stories for markets, but for corporates, it really looks different. And the super cycle conclusion, tells us that this isn't new. In fact, you know, we're more than ten years into this curve of accelerated geopolitical risks. And, again, that's before Trump two point o and what it means for what I call the US global reset, and that's the trade and security relations reset. You probably won't have had time to see it yet. I think even the Bloomberg journalist I spoke to this morning hadn't, but the bombshell document last night from the US National Security Strategy, for example, really highlights the fact that the United States, is not interested in an alliance with Europe, in a way that is impossible to, well, deny.

Indeed. I think the document even portrays Europe as slightly mad or lunatic in in some senses.

I mean, there's a risk that we go down a rabbit hole talking about it, but I'm not engaging in hyperbole when I say that that US national security document, which you can find on the White House website, uses language from the far right great replacement theory to talk about Europe, that it won't be European in twenty years' time. And I think we know what they mean when they say that.

That's, indeed very chilling. Now we've set the scene, I think, for this geopolitical super cycle.

I think we've got everyone's attention.

Yeah. I think so. Two of the, concepts that you use for, corporate leaders to deal with this, environment are geopolitical mindset and pragmatic optimism. These are fascinating ideas. Take us through those and how they take boards forward.

Thank you very much. Well, I do a lot of presentations. I think that's kind of the entry level, you know, drug, if you like, for people who want to get to grips with geopolitics. And so in the past, and I've been doing this over twenty five years, I would be brought in to talk about, you know, kind of a tour of the horizon.

What are the hot spots? You know, what are the things that we need to worry about? But, again, twenty twenty five has really shifted the focus where leaders are asking, for not only that tour of the horizon, the key signposts and flashpoints and things, but more guidance on what to do to manage geopolitical risks. And so that is quite new. It it really has emerged this year. You know, you can point to certain sectors, for example, commodities, metals and mining, you know, defense and aerospace where they would have always been paying attention to long term geopolitical considerations. But now these concerns have entered the decision making process for any company with any kind of international customer base or supply chain, and so that's every company.

Developing tools and approaches to, address this need has been a very interesting exercise, and it does, you know, relate back to this generation x assumptions, but also accountancy standards, frankly. Almost every board leader is an accountant, and accounting standards have no way of dealing with, let's call them material probability events.

I I talk about plausible hypotheticals because you mark a risk as a zero or a one. It's either going to happen or it's not going to happen. And that, worked when we had an international system that was broadly stable, when conflicts happened in, you know, kind of distant frontier or weak or failing states that didn't impact the bottom line, and when governance was reliable, when the rules of the game were clear.

Now none of that is clear. We actually are trying to do some work on developing some some alternatives, but there isn't an off the shelf solution for this. You know, I just did a presentation with the ACCA talking about it. And much of much of these conversations, you know, is really, like, translating and interpreting big macro events that can start to impact bottom lines, but not necessarily reflected in in a market shock, in an asset price or, change or or a growth risk, if you'll bear with me. And so how to do that is not a one size fits all conversation either. So a lot of companies are doing things like geopolitical audits. That's one sort of step.

What we tend to do in in our work at Fordham Global Foresight is what I call raising PQ, political quotient, because my experience is that you you you can't subcontract this sort of change in in the in the lens if you like to one person or one individual and it also doesn't belong in the risk and ops division. Right? This cuts across all elements of strategy, and so all of us need to probably get out of our comfort zones a bit and learn to raise our political quotient. I've got a lot of ideas about how to do that. Again, that's what the what the book is about. But maybe the the first step is to acknowledge that the the lens that we use has has moved away from, let's call it, optimization, you know, just in time supply chains, p and l driven, you know, lowest cost of production to resilience.

That sounds good. Everyone likes resilience. It's a big management buzzword, but resilience means durability, stability, and higher prices. It's going to be more expensive. And that really goes against, what most most board leaders have have been taught and have practiced during the course of their careers. It's a big adjustment.

Just let me go back to your reference to, governance for a moment. Are you implying that we need new governance models to handle the current era that we're in?

Well, the way that I would put it is that the governance models that we have don't really capture the extent of the changes that are that are going on, at the moment. And the World Bank and the IMF just put out a new document yesterday as well. You know, it's that time of year, everybody publishing their strategies. And, you know, I've referred to in different ways this notion of a golden age in the global environment, and it's a post World War II order.

It's the Bretton Woods institutions. It's, the the rule of law, international rule of law, and and everything else. We are now seeing the normalization of corruption at the highest levels. You tell me, Gavin, if you think that current governance methods and practices are equipped to to deal with that.

Well, I don't I'm not the expert, but it but it does seem the general thrust of our regulation over recent years has been to cope with that, to push back on that, and now it's hit a brick wall.

So if we're talking about Europe, of course, peace through regulation has been the kind of the default mode. And, you know, the the full scale Russian invasion of Ukraine in twenty twenty two exposed that peace through regulation and indeed the financial interdependence between Russia and Europe that Germany in particular presided over hasn't worked. Now since Trump one point o, the European Union has been talking about Trump proofing Europe, but it didn't really do that, which we saw after Liberation Day with the tariffs.

So we're in a period of a lot of casting about for different solutions.

And I I mean, I have to emphasize that, of course, listeners to this podcast will be focused on how to deal with this in their, you know, in their day jobs, but we're also in the midst of a security emergency in Europe. And the penny hasn't really dropped for the public, the way that it might have. I mean, Zelensky landed in Dublin yesterday, and, his plane was tracked by four military drones. Now we've had a lot of this activity in Europe, but let's remember that Ireland is not only not a NATO member state, but officially neutral.

You know, there's going to be a shakeup from the top at the same time as, you know, we're going to be flying this plane of running companies and making board decisions at the same time as the global environment's in flux.

You know, agility, adaptiveness, but the first step is that boards start to need to start having these conversations in an honest way.

So I wonder what practical actions business leaders can take because it it strikes me that and we've talked about denialism, that if you were a corporate leader and you did continue focusing on costly returns in some way, that might seem quite rational because you don't know what's gonna happen. So I gotta focus on the here and now.

So so that is absolutely true. You can't, you know, pivot away from everything in the absence of anywhere to land, but I think it's about adjusting assumptions. And one of the things I talk about a lot is stress testing plausible hypotheticals. And there are just a lot more of them than than there used to be, and even thinking the unthinkable. Now that scares people. When I say these things to an audience, I can see the fear in people's eyes, and you just can't react that way.

As board leaders, we have to anticipate, a, how shall we say, a a wider bandwidth of possible change.

Russia and the United States and China do not believe that Europe will will last. I think they're wrong, but if European companies want to mitigate against that, they probably need to get more involved with the security discussions.

And, you know, I also advise the Ministry of Defense here in the UK, and that's something that's ongoing. We're talking about a return to the draft in many countries.

Germany, possibly here in the UK, and this will impact workforce, for example. So, companies have focused on, quite rightly and understandably, on the things that are easier to control, like cybersecurity, but we're going to need to bring in some imagination into boardrooms. You know, I advocate for executive education to, you know, to to think through these, you know, unthinkable and plausible hypothetical scenarios because there is a I think a a a sense that, you know, risks that are twenty percent, thirty percent are are not likely to happen. That's just not true.

First of all, if you understand probabilities and, you know, if you look at what we've experienced. Now having gone through Brexit here in the UK, should have made us a little bit better at at thinking about this.

I'm not sure that it's been the case that we are thinking more broadly. At the same time, there are a lot of positive unintended consequences, silver linings and wild cards to come if you don't, you know, get paralyzed by the first order effects like the Russian gray zone attacks and US tariffs.

Tina, I it's an interesting description.

One thing that occurs to me as as as I think about the enormity of the topic is the capacity inside boardrooms to deal with it. And and I'm not just talking about skill sets and knowledge bases, and and boards can resolve that by buying in consultancy. But I'm also talking about sheer numbers. I I do wonder whether boards many boards are equipped with the number of people they need to deal with the multiplicity of issues that are on their plates at the moment.

Because at the moment, I I see, whenever I pose something like this question, the response is generally, oh, it's okay. You know? We just, generalists are still okay. They just need to get their head around the issue.

But it seems like this in itself is a big enough issue to step back and and ask some fundamental questions about boardroom and executive capacity.

Yes. But as you say, that does tend to to overwhelm people. And so I I'm very, you know, thoughtful about how I raise these issues. You know, let's be clear. If boards spent any time with geopolitical issues, it was by bringing in a retired general or a diplomat or somebody's mate who worked at the foreign foreign office once a year to brief you.

But understanding organizational dynamics, of course, you know, that conversation may as well never have happened because it just evaporates into thin air when the distinguished gentleman leaves the room, and it is usually a gentleman. And that's why I advocate for executive education and, you know, kind of unlocking those neural passages and ways of doing things. Board leaders are successful people. They're successful executives.

They tend to think that their success is because of the, you know, practices that they've used all this time in their career. And so teaching, you know, us old dogs new tricks doesn't always go down well, which is why it has to be, I think, mandatory and led from the top. And again, not framed purely in risk terms, in downside risk terms. That's another error.

Most ports like to deal with operational risks. That's their comfort zone.

This needs to be considered in terms of upside potential as well as, you know, guarding against downside risk, and that maybe is the hardest part.

We are entering a period when we might see some more change. The Supreme Court in the US is going to rule on Donald Trump's tariff policies. We also have midterms in the US next year. I wonder if these two events and potentially others will have further impact on the way trade and is happening and the way businesses have to adjust.

Yes. The the Supreme Court's decision on on one subset of of the Trump tariffs will be very closely watched. You've seen some US companies actually already file lawsuits to demand the return of the fees that they've paid in tariffs so far.

Costco, I believe has done.

Yes. And if Costco goes, then I think there will be others.

So unsurprisingly, as a political scientist who's been working in finance for twenty five years, I want to make sure we don't just take data points in isolation. That decision will be important. The Supreme Court in its initial opening remarks, already suggested it's not comfortable with the use of the White House use of executive authority for tariffs. That's something that belongs to congress.

At the same time, the Supreme Court will be cognizant of the fact, a, that it has deteriorated in terms of its reputation for impartiality amongst the US public markedly. Only about twenty percent of Americans trust the Supreme Court. That's a shocking number that, you know, again, predates Donald Trump that that has taken place. So they want to preserve their own integrity of their decision making process. And then there is the just the simple mechanics of returning this money. So, you know, companies and and and the market will look closely at the decision.

There was some suggestion that it might come before Christmas. That seems unlikely now, but, perhaps in the first quarter.

The, US Treasury Secretary, Scott Bessent, has said that it would be a massive national security issue.

It's safe to say that, it will be through the courts that, constraints are placed on president Trump's authority and his, efforts to test the boundaries of executive authority, for for US presidents. The midterms will be watched very carefully. We had a special election earlier this week in in Tennessee whereby a lot of US pollsters put out analyses that said if if there was a uniform swing in that direction, it would be, something like a a blue wave. Now that might give people a lot of comfort if you're in the mean reversion camp that says, okay. You know, Trump was voted in, and his agenda might be constrained by midterms by the supreme courts. That's all true.

In the meantime, a lot of damage is being done to institutions, but more broadly to the US reputation, as a global partner. Now the United States is still the biggest stock market in the world, highest growing country. Most of my clients want to do more business there, but we have a hedge America trend that's going on. And in Europe, it's more active. It's a decoupling, scenario, and that's quite dramatic. But if I can be permitted to make one more point about what's happening in the United States, it is that next year is also the US quintessential, the two hundred and fiftieth anniversary of the signing of the declaration of independence.

So there is going to be, you know, a patriotism contest going on, you know, to to kind of, you know, performative, discussions and displays of of the wisdom of the founding fathers. The US Declaration of Independence is an incredible document, by the way. It it really does bear reviewing, if you haven't read it lately. But, there'll be a national conversation about where America is headed before these November midterms take place. And I think that there is also a material risk that there is is violence, as we head into those midterms, and I don't say that lightly.

That's, an unpleasant thought, and we can only hope that that doesn't happen. You mentioned, Europe there.

There are shifting balances of power happening in the world between the US and China. Where does Europe find itself? How does it find it a way through what's happening at the moment?

Oh, and and let me just add as well. As an outlier, we're we're sitting in the UK talking about this, and we're outside Europe, we're outside China and the US. So we we occupy a special position at the moment as well.

Well, and so, you know, that's a that's a worthwhile topic to take on because I mentioned Brexit and how we in the UK had experienced this fairly dramatic event. I still meet, you know, chief execs and others who in the UK who say it was all fine, You know, let's not get into that debate here, but that was a voluntary disentangling from, you know, the UK's biggest trading partner.

I think it's hard to argue that there wasn't a hit to growth. It certainly hit the city of London. But the bigger lesson to me is that the Brexit referendum took place in an environment, think way back to twenty sixteen, the UK was growing robustly. In twenty fifteen, there was a a a big, flow of migrants through through Europe as well.

But when you take irreversible decisions or major decisions on the basis of current events, this might seem to argue against geopolitics, but no, current events is different from geopolitics, that the environment can change. And I think that that's what the Brexit referendum shows us. The conversations I was having in the city at the time were, you know, were well you know, were doing well to get out of that. But what what does it take?

You know? There's nothing like an external adversary to focus minds, And Russia has been an external adversary, and you have seen support for European Union membership within the EU, including here in the UK, rocket up since that Russian invasion. And I suspect that that trend will be accelerated by this you know, it's not even US ambivalence anymore. This national security document talks about the need to replace leaders.

It talks about regime change. Now, you know, in the narrow sense for the UK, if you think that it's good that the UK is partnering with other powers, and I personally do think that that's good, then we have seen during the course of this year, the UK Prime Minister kind of back in the room with the German Chancellor and the French President and other leaders. And so that isolation, which I think no country can really afford, in in a more contentious environment, has been reduced. And there is interestingly, you know, this will make many listeners wince, momentum growing for, oh, what was it called, brajoyn.

Now politically, that is completely toxic.

But in the public opinion data, it's desirable. And so I, you know, predict that within sort of five years or five to seven years, something like that will be back on the table.

And how does Europe position itself at the moment given the national security document, given it given reliance somewhat on trade with China and elsewhere?

Well, there are of course, there's no unified, you know, European view, and that's why the German chancellor is going to Belgium today to tell the the Belgian prime minister who gets hundreds of millions in in revenue from those, you know, confiscated Russian assets that go into his budget that he needs to let go and redirect those those assets to Ukraine. These are conversations that just haven't taken place before. And so the frozen Russian assets discussion is actually a microcosm in many ways for where we find ourselves in the international system where the US, you know, again, this just came out overnight, was reportedly briefing some EU member states not to support that loan that is being proposed with those frozen assets. It's not against the whole value. That is very surprising in diplomatic terms.

And the Whitkoff and Kushner visit to to Moscow, you know, it appears they may have promised Moscow that they'll get those assets back even though they're not America's to put on the table in a deal. And meanwhile, China can watch, put its finger on the scales by supporting the Russian war effort, and and hope that the international system unwinds and allows it more, you know, the exercise of more power. I think that this is too much for most people to hear in a board discussion. It sounds too abstract, but I'm gonna quote that, you know, famous Hemingway quote about gradually and then suddenly.

We're in suddenly now.

Lots of uncertainty there. Lot lots of moving parts. A lot to come to terms with. Is are there any to finish up, Tina, we're coming to the end of our time. Are there any silver linings in the geopolitical situation at the moment that will enable boards to cope and manage in the way that you've described during the course of our conversation?

Of course. Of course, there are silver linings. Of course, the the you know, lots of companies are still gonna make a lot of money, but what I think we can't afford to do is that let's wait for the dust to settle instinct, that I do I see time and again. I like to quote Louis Pasteur, fortune favors the brave, chance favors the prepared mind.

If you don't like to engage with these kinds of, you know, themes, how can you recognize an opportunity? Risk and opportunity are two sides of the same coin. The chief risk officer tends to be, you know, the person who says no, and other parts of the organization are the ones advocating for expansion and acquisitions and things like this. It's probably going to be a banner year for M and A next year.

I have a lot of clients who are taking on risk in this environment. I think the question is what are they doing that other companies might do, and they are embracing change.

Well, I think that note, Tina, embracing change is a good place to end our conversation. Tina Fordham, thank you very much for joining us today on Governance Watch, and thanks to all of you out there who have listened in. I've been Gavin Hinks. Goodbye.

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