Anticipating Change: Navigating the Complex Landscape of 2025
As we step into a new year, business leaders worldwide are bracing themselves for yet another period of significant change. This marks the fifth consecutive year where the anticipation of material shifts is palpable, with early signs of volatility already evident. In this dynamic environment, effective leaders have honed their skills in risk management and adaptability. Here, we explore the key trends they are monitoring and responding to in 2025.
1. Geopolitical Shifts and Emerging Risks
Geopolitical changes continue to unfold, presenting new risks even as existing ones are addressed. Events that were once considered rare are now occurring with increasing frequency and at unprecedented scales, affecting business strategies and operations in complex, nonlinear ways that differ across countries and sectors. The WTW Emerging Risk Survey highlights the relentless pace of this complex risk landscape. Notable events include the earliest Category 5 storm on record, Beryl, a global technology outage involving CrowdStrike, ongoing conflicts in Ukraine and the Middle East, heightened tensions in Taiwan and North Korea, the Baltimore bridge collapse, significant labor strikes, a high-profile CEO assassination, and what the Economist has dubbed “The Biggest Election Year in History.”
Looking ahead to 2025, business risks include ongoing climate threats such as fires, floods, and severe weather, regulatory changes, trade conditions, financial investment flows, market shifts, property risks, gray zone attacks, shipping and global supply chain disruptions, infrastructure challenges, cyber-attacks, disinformation campaigns, commodity price fluctuations, inflation, and employee and executive security concerns. Effective leaders are reassessing their current approaches to ensure they can navigate today’s operating environment rather than being steered by it. They mitigate risks where possible, adjust plans as necessary, and prepare their teams to act swiftly and decisively when needed.
2. The Rapid Pace of AI and Technology Development
The development of AI and new technologies continues to outpace their adoption, revealing additional limitations and risks, thereby increasing the automation paradox. Generative AI and other emerging technologies are surprising users and leaders with their capabilities and limitations. During the recent UK elections, an AI avatar named Steve ran for Parliament. Generative AI robotics are advancing more rapidly than many anticipated, as are effective multimodal and reasoning models. Companies like Microsoft and Open AI are making significant progress, while Apple and Meta are advancing in virtual reality and spatial computing. Google has announced a quantum computing breakthrough with Willow.
However, AI development faces setbacks, including accessibility issues (many AI coworking applications underperform), imposters (the ability to use technology lags behind developments), and limitations in data, skills, and deployment capabilities. Changing regulations, new lawsuits, and pervasive cyber breaches underscore the early days of technology governance at both governmental and corporate levels. Effective leaders are shifting from traditional risk management and governance protocols to more dynamic governance models. They are also becoming more realistic about the pace and impact of technology adoption on customers, employees, and performance, recalibrating expectations and commitments accordingly.
3. Labor Markets, Inflation, and Talent Shortages
Labor markets, inflation, work arrangements, and talent shortages remain prominent topics. Many business leaders expect these issues to stabilize by the mid-2020s. While economic aspects of these topics have improved over the past year in most developed economies, there are concerns that conditions have become less favorable in recent months in key markets such as the UK, the Eurozone, the U.S., and Canada, with potential for further deterioration in 2025.
Permanent demographic shifts, including a baby bust, are creating long-term talent shortages for certain jobs and skills that could persist for years. The return to offices remains a global topic, with real estate and job data showing significant differences in work practices across regions, countries, and even cities. Recent research from WTW indicates that flexible work trends are gradually shifting, with nearly two-thirds of US companies (61%) implementing formal policies requiring on-site attendance for a minimum number of days per week. More companies are also onshoring and near-shoring to address geopolitical, supply chain, and talent availability issues. Effective leaders continue to closely monitor conditions and implement new talent strategies as boards and senior management teams increase their focus on culture, employee experiences, and the transformation of pay, benefits, and career programs to drive performance in a changing environment.
4. Prioritizing People Risks
People risks are at the forefront of business concerns. A recent survey indicates that board members view human capital as a high-priority topic. The latest WTW Global Directors and Officers Survey reveals that boards and executives consider employee health and safety as a top organizational risk. Companies with higher levels of employee wellbeing tend to outperform their peers. Human capital governance is becoming a core element of enterprise risk management (ERM) frameworks in an increasing number of organizations. Effective leaders engage in holistic and strategic human capital discussions, considering human capital metrics in the context of performance, productivity, and risk. Topics include developments in labor markets, skill shortages, succession planning, retention, compensation and benefit programs, and employee wellbeing (financial, physical, emotional, social), as well as costs. Effective leaders view these efforts as a material component of effective business leadership, aligning with company strategy, creating competitive advantage, and driving performance.
In conclusion, as we navigate the complexities of 2025, business leaders must remain vigilant and adaptable. By understanding and addressing these key trends, they can position their organizations for success in an ever-evolving landscape.
Originally Written by: John M. Bremen
