Geopolitics is increasingly having an impact on businesses in Papua New Guinea across all sectors, including financial services, energy and retail. In this piece, the team at KPMG Australia’s Geopolitics Hub shares their top eight geopolitical risks for PNG businesses to watch out for.

PNG DataCo’s Data Center and Satellite Earth Station at Gerehu, Port Moresby. Credit PNG DataCo

Geopolitical tensions should concern all business leaders and how they prepare is crucial. Our Top Risks to Australian Business 2024-25 report, adapted in this article for Papua New Guinea, is helping business leaders prepare strategically and operationally for an increasingly volatile future.

There is now a real fluidity in the global risk environment and the norms we once understood are now deeply fragmented. From defence, financial services, consumer and retail, energy and resources and advanced manufacturing, no industry is immune and how they respond will be key to their success or otherwise going forward.

Some of the top risks affecting PNG and Australian business right now include:

1. Artificial intelligence (AI)

The future of business is deeply intertwined with AI advancement, offering transformative potential if properly managed and governed.

The global regulatory environment for emerging technology is growing more complex and fragmented, meaning businesses will have to spend more time, money and effort steering their companies through uncharted waters.

2. US politics and policy

Research shows that, as the United States grapples with internal political polarisation and mistrust in institutions, it is increasingly adopting economic nationalism and inward-looking policies.

This shift has significant implications for PNG and Australian businesses and the global economic landscape, as the US is steering away from its traditional role as a champion of free trade to prioritising domestic industry and using trade policy as a strategic tool.

3. Australia’s national security

When it comes to geopolitics, our nearest neighbour’s stance on security can be relevant to PNG.

Australia is proactively addressing its national security concerns by becoming more selective in its commercial relationships.

We are moving towards a future where geopolitical interests play a larger role in determining trade relationships.

Legislation such as the expanded Security of Critical Infrastructure Act and the Future Made in Australia Act highlights a strategic shift towards strengthening sovereign capability in areas deemed critical for securing the national interest.

This shift underscores the growing emphasis on national security in economic strategy, affecting investment, operations, costs and overall market dynamics within Australia.

4. Misinformation and disinformation

The proliferation of misinformation and disinformation on social media, driven by sophisticated algorithms, is fostering social and political division and eroding trust in essential institutions, posing significant challenges to businesses.

As this trend prompts a debate on content regulation and the ethical use of persuasive technology, companies must contend with a polarised consumer base and consider their role in advocating for responsible digital practices without infringing on free speech.

5. Plummeting trust in public institutions

Widespread mistrust in political and public institutions leads to a precarious environment for business.

This mistrust is fostering instability and an inclination towards more nationalist and protectionist policies.

The demand for greater transparency and accountability is rising in response.

6. De-globalisation

Global trade dynamics are shifting as nations increasingly focus on building resilient supply chains and engage in ‘friendshoring,’ which involves trading with politically reliable partners over purely economic ties.

This suggests we are moving towards a future where geopolitical interests play a larger role in determining trade relationships.

Businesses must strategically adapt to a geopolitical landscape where supply chain resilience, selective partnerships and regional investments take precedence over traditional global-scale efficiency.

7. Imbalance between long-term and short-term strategy

For sustainable success, organisations must strike a careful balance between short-term responsiveness and long-term planning, ensuring neither is prioritised at the expense of the other.

Both in politics and business, a focus on immediate gains can undermine growth and adaptability, whereas overlooking short-term realities may impair operational effectiveness and agility in times of crisis.

8. Climate change and biodiversity loss

Climate change and biodiversity loss are significantly influencing business landscapes, particularly in the Asia-Pacific.

The dependency of over half of the world’s economy on industries reliant on biodiversity means that considerable economic value is at risk. With agriculture both affecting and impacted by these environmental changes, businesses face supply chain disruptions, challenges in food production and the necessity to adapt to shifting conditions.

Companies must navigate these complexities, understanding that their operations and long-term sustainability are intertwined with the planet’s environmental health and the socio-political stability of the regions they operate.

This first appeared in KPMG Kundu September 2024, under the heading, “KPMG reveals top geopolitical risks for PNG and Australian businesses.” Republished with permission.