It is the curse of commentators. Regular readers will recall my prediction that the recent period of geopolitical volatility had been cast aside. How wrong I called that, though I suspect I was not the only one.
The events of the past few months in the Middle East have reminded us all of how little control we have. Until then, the world had seemed to have become manageable again. Inflation, cost of living pressures, supply chain disruption and energy price shocks had all receded into the rearview mirror.
But they’re all here again. Volatility is back.
Collapse avoidance
The conflict involving Iran has delivered a fresh jolt to energy markets, to shipping lanes and to the broader sense of stability that businesses, and indeed governments, had perhaps too readily assumed was permanent.
The question worth asking now is not simply how bad things might get, but whether, after everything that has happened in the past five years or so years, we have actually learned anything useful from the last time the world fell apart.
Supply chains optimised for cost rather than resilience snapped
Because it very nearly did fall apart. Covid-19 did not merely cause a health crisis. It exposed just how fragile the architecture of the global economy had quietly become. Supply chains optimised for cost rather than resilience snapped under pressure in ways that caught many badly off guard. Companies that had never seriously stress-tested their exposure to sudden, sustained disruption found themselves scrambling for alternatives at the worst possible moment and on the worst possible terms.
Then came the war in Ukraine and with it an energy price shock that drove inflation to levels not seen since the 1970s. Households were squeezed, corporate margins compressed and businesses that had assumed energy costs were simply a line item to be managed discovered that assumption carried a very heavy price.
Hard lessons, easy assumptions
So what did we learn? The honest answer is that we learned some things, forgot others and, as the pressure eased, gradually drifted back to the comfortable assumptions we had held before.
The past five years has created leaders who have been genuinely tested
To be fair, many businesses did take the lessons seriously. Supplier networks were rebuilt to emphasise resilience rather than pure efficiency. Contingency plans that would previously have been dismissed as excessive caution were drawn up. Businesses also learned to read the signals of rising input costs and to know which price increases they could pass on and which they would have to absorb.
More importantly, some developed a different kind of institutional recognition that stability is not a default condition but something that can collapse without notice. What the current situation in the Middle East is now testing is whether those lessons have been sufficiently learned to navigate another episode of serious disruption.
Stress-tested
There is, however, a more optimistic reading of where we find ourselves. The experience of the past five years has created a generation of leaders who have been genuinely tested. They know what a supply shock feels like from the inside. They have sat in the rooms where difficult decisions had to be made under pressure. That is not nothing. For all the justified criticism of how quickly hard lessons can be forgotten, many businesses adapted with impressive speed when they had to.
Those still waiting for stability to return may find the wait a long one
The challenge now is to treat that experience as an asset rather than a footnote. The age of predictability, if it ever truly existed, is behind us now. The organisations that accept that reality and plan accordingly will find the current volatility manageable. Those that are still waiting for stability to return may find the wait a long one.
The lesson of Covid, of Ukraine and now of the latest Middle East crisis is not that the world is uniquely dangerous. It is that the world has always been dangerous, and that the task of business leadership is to build organisations capable of functioning when, not if, the next shock arrives. Some companies have genuinely learned that. The age of turbulence has not passed. It has simply been reminding us, with increasing regularity, that it never really went away.
More information
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Read this AB article on accountants leading in a volatile world
