Strategic Assessments

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©2019

Author: Dr. Heiko Borchert

Flow Control Rewrites Globalization

Implications for Business and Investors

Published January 29, 2019

 

 

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Available January 29, 2019

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Abstract

Today's international order has enabled the free flow of goods, services, data, capital, and the unrestricted movement of people. These strategic flows have advanced prosperity and deepened connectedness. But the fraying international order gives rise to a more skeptical view on connectedness. Rather than emphasizing the benefits and opportunities, a prevailing zero-sum logic underlines and exploits the vulnerabilities of dependence. That's why nations, in particular ambitious emerging status quo challengers, increasingly focus on flow control.

Flow control describes the will and the capability of an actor to set the framework and the operational conditions for strategic flows. This entails the power to (1) define, monitor, and enforce the rules that enable flows, (2) decide upon access to and maneuverability within the geospatial corridors that flows travers, (3) shape the volume and the direction of strategic flows by using flow enablers (e.g., infrastructure, transport means, technology) for one's own purpose and denying their use to competitors.

The business impact of flow control will be fundamental, because it affects corporate supply chains. Corporate supply chains provide the highways for strategic flows and are at the center of the emerging geo-economic competition. Ambitious status-quo challengers want to exert power by shaping the volume and the direction of strategic flows. That's why they will engage in downstream, upstream, midstream, and lateral supply chain competition.

Investors will need to think carefully about three immediate consequences. First, they require more clarity about corporate geostrategic risk appetites that need to inform risk reporting. Second, corporate sanctions vulnerabilities increase because sanctions are getting more personal – thus hitting corporate executives – and focus on technologies that serve as corporate strategic differentiators. Investors will want to know how companies will mitigate both risks. Finally, the motives and the origin of investors come under tight scrutiny thus requiring investors to be warier about potential investment partners.


Content

Executive Summary

A Fraying International Order Accelerates the Rise of Flow Control

Grand Systemic Competition Reloaded: The Four Key Dimensions of Flow Control

Competition for Zones of Influence

Competition for Rules, Norms, Principles, and Standards

Competition for Narratives

Competition for Prosperity Models

Porter Goes Geopolitics: Consequences for Business

Agro-Business

Banking and Finance

Construction and Infrastructure Development

Defense

Digital Industries

Extractive Industries and Mining

Transport and Logistics

Three Considerations for Investors
Geostrategic Risk Appetite and Risk Reporting
Sanctions Vulnerability
Investor Risks
Conclusion
Literature
About the Author
About HEDGE21


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