When the World Shifts: Leaders and the New Geography of Risk

Executive Summary Since Covid, business disruption has become continuous rather than cyclical , pushing geopolitical risk into the centre of boardroom decision-making.

The ability to translate macro shocks into firm-level consequences is now a core executive capability.

Supply-chain resilience requires procurement teams to prioritise geographic diversification alongside cost, quality and speed.

Financial resilience depends on structural discipline, including adequate liquidity buffers, prudent debt management and conservative hedging .

Capital allocation must balance investment across the core business, adjacencies and emerging ventures .

Robust governance and stakeholder transparency strengthen an organisation’s ability to access capital when conditions deteriorate.

. The post-Covid years have not produced a ‘new normal’, but instead, a series of compounding shocks. Supply-chain fractures, energy-price volatility, trade weaponisation and a surge in active conflicts have collectively dismantled the assumption of a stable operating environment. Geopolitics, which once appeared in boardroom risk registers as a distant, low-probability variable, now sits at the top of the table. A McKinsey study found that 72% of senior executives today identify it as the primary risk to their business. The real question, though, is not whether organisations recognise the shift, but whether they have built the institutional capacity to respond to it continuously. Amit Agarwal, Executive Director, Group CFO, DCM Shriram, examined what permanent-crisis leadership actually demands – operationally, financially and structurally.

The 50,000-Foot Problem Where business leaders tend to fail is not in terms of being ignorant of geopolitical events, but in their inability to translate such events into firm-level consequences quickly enough to matter. The Gaza and Iran conflicts, for instance, immediately hit freight routes, energy costs and chemical supply chains running through the region. Israel is a meaningful source of agricultural technology; West Asian petrochemical capacity has been damaged in ways that will take years to restore; and Strait of Hormuz exposure affects every energy-intensive manufacturer in India. These are direct inputs to procurement, pricing and capex planning. The discipline now required of CFOs boils down to daily practice: reading macro news with the explicit question of which business sensitivities it activates, then working backward through the supply chain to assess exposure. This is operational intelligence, not scenario planning.

Supply Chain: From Lowest Cost to Geopolitical Risk Score The supply chain lessons of the last 5 years are straightforward, yet consistently ignored and unlearned. Organisations revert to cost, quality and time as the primary procurement criteria the moment a crisis recedes, which is precisely when they should be acting. Geographic redundancy must be permanently embedded as a fourth criterion, one that is weighted even when it costs 1-2 percentage points in margins. After all, a supply base concentrated in a single geopolitical corridor is a liability whose cost is invisible until it becomes catastrophic.

DCM Shriram's experience with coal procurement illustrates the point. The sudden imposition of an Indonesian export quota, unrelated to any single event, drove significant price and availability disruption. However, by previously building a two-and-a-half-month coal inventory, the business had bought itself a time buffer that other companies, which were running just-in-time inventories, did not enjoy. The broader prescription is for organisations to trace their supply chains not just to tier-one suppliers, but through to their tier-two and tier-three levels, identifying concentration risks that do not show up in a standard vendor review. In the pharma sector, that might mean APIs and key starting materials. In chemicals, it could means the inputs to byproducts whose demand shapes the viability of the primary product.

The Resilience Fundamentals There is (and should always be) a clear distinction between operational responses to a crisis (inventory management, contract design, pricing pass-throughs) and the fundamentals that determine whether an organisation can sustain its responses across multiple cycles. The fundamentals are less visible but more durable.

In terms of liquidity, DCM Shriram operates with a hard floor: cash should not fall below Rs 500 crores at any point, regardless of the carrying cost. An equal quantum of unutilised working-capital lines provides a second buffer. The principle is that negative carry is preferable to a forced decision in a stressed market.

With regard to debt structure, the group maintains a net debt-to-EBITDA ceiling of 1.5x in normal conditions, rising to 2x during a capex cycle, and with explicit visibility on the return trajectory. Short-term debt cannot exceed 40% of the total debt book, and repayment in any year should not exceed 20% of expected cash generation. A recent $90 mn sustainability-linked NCD from IFC Washington, structured over 11 years, reflects this logic: the premium paid for the long tenor was the price of resilience, not inefficiency.

On hedging, the firm’s approach is disciplined and deliberately uncomplicated. Treasury is a cost centre, not a profit centre. Exotic derivatives are off the table. When the forward view is unclear, losses are cut rather than held in the hope of recovery.

Capital Allocation as Strategic Architecture Resilience without growth is mere stasis. DCM’s framework for capital allocation is built around a rough distribution: approximately 40% to the core business, 40% to adjacencies within the existing business architecture, and 20% to genuinely new ventures where the organisation is simply ‘putting skin in the game’. Of the Rs 50 bn DCM Shriram invested over a recent three-year capex cycle, 25% was directed at cost-reduction initiatives, an embedded hedge against margin pressure rather than a reactive response to it.

When it comes to spending on innovation, DCM takes a deliberately broad approach. Rather than just ‘new products’ or ‘R&D’, innovation is defined to include new business models, new customer segments, backward and forward integration, and diversification into adjacent industries. This helps create a strategic moat for the business.

Governance as a Balance Sheet Asset Perhaps counterintuitively, transparency can create huge financial value. Mid-way through a Rs 50 bn capital-raising program, DCM Shriram's EBITDA fell from ~Rs 18 bn to Rs 12 bn. However, instead of facing new funding pressures, having proactively disclosed its earnings trajectory to a senior risk officer, it was able to access additional bank funding. The capital was made available, thanks to a relationship built over years of consistent, candid communication – and crucially, because the element of surprise was missing.

This is a great example of governance being treated not as regulatory compliance but as a strategic asset. Even in adverse circumstances, this enabled it to access capital on reasonable terms, precisely because the counterparties had both, reliable information and a track record against which to assess it.

Organisations that navigate today’s ‘permanent crisis’ well are not those that react most quickly to individual events. They are those that have, in calmer periods, deliberately built the structural conditions (liquidity, diversified supply chains, distributed capital allocation and trusted stakeholder relationships) that allow them to absorb shocks without being forced into reactive decisions. In a world where the next disruption is not a risk scenario but a planning assumption, resilience is not a defensive posture. Rather, it is the foundations upon which growth gets built.