The second half of the 2020s is likely to hold an extremely volatile operating environment for businesses. War in Europe and the Middle East, emboldened autocrats and shifting regulatory landscapes—such as the weakening regulation of climate and human rights due diligence in the EU and a new US administration challenging DEI (diversity, equity and inclusion) and environmental standards—are creating significant challenges.

As recent wildfires raged in California and unusually strong winter storms battered the west coast of Europe, it can be easy to lose sight of the quiet crises elsewhere: droughts in Brazil; coffee prices in Vietnam and West Africa that have jumped almost 18% in the first two months of 2025; and cocoa prices that soared by 136% between July 2022 and February 2024.

Two years ago, the World Economic Forum warned of this ‘polycrisis’ we now face: a series of interrelated, compounding challenges that signal a new normal of persistent instability.

How can businesses effectively navigate this web of interconnected challenges and seize opportunities that arise?

Navigating a world in polycrisis

The pace of change and disruption can feel overwhelming, with scenarios that would have seemed unthinkable just a few years ago now becoming commonplace. How can board members strike the right balance between staying informed about the latest developments, while not becoming overwhelmed by the news cycle?

How do you avoid losing sight of what truly matters for the long-term prosperity and wellbeing of the business—the ultimate focus of your fiduciary duty? And how can you best guide a business to become and remain future-fit for the volatility of the decade ahead?

To effectively support a business in navigating the complexity and unpredictability of a world in polycrisis requires board members to be clearsighted about the future operating context the business faces. It is vital to recognise both the value at risk from complacency and how much potential value there is to gain from proactively getting ahead of the big changes that are coming.

In my experience, it’s common to underestimate all three types of operating context risks that can erode the value of a business: transition, physical and systemic risk.

People typically underestimate transition risk as they assume the future will be a linear extension of the past. As an example, almost every industry is facing some form of disruption with technology, from AI, robotics, precision fermentation, synthetic biology to clean energy.

But transition risk goes beyond technological breakthroughs and also encompasses sudden shifts in policy, markets and cultural norms. Some transition risks, such as the switch from fossil fuels to cleaner forms of energy, are structural and more predictable, while others, particularly cultural shifts in the zeitgeist or policy shifts with a new government, can be dynamic and far harder to anticipate.

Underestimating physical risk to your business often stems from a narrow focus on an organisation’s own operations, ignoring vulnerabilities across the entire value chain. Even businesses that have reinforced their operations to reduce vulnerabilities are likely to have suppliers or customers, particularly in the Global South, that face escalating physical risks that can significantly erode value in a business.

It’s also important to look beyond acute risks such as floods, fires and civil unrest, and to account for chronic risks that will have ongoing impacts such as changes in temperature or rainfall patterns.

Systemic risk is too often absent from value-at-risk conversations. This type of risk arises when one or more of the systems that make up a business’s operating context degrade or fail. When access to essentials such as water, food, social cohesion or the rule of law is compromised, doing business can become untenable.

Systemic risks may emerge gradually through the self-reinforcing effects of interrelated physical or transition risks, steadily eroding the health of a system until it collapses. They can also come from much more sudden threshold risks, where a system is able to absorb changes with little visible impact until a tipping point is reached, and collapse is abrupt. Some business decisions may be justified, as without them a liveable, hopeful future for our civilisation may not be possible.

Value vs risk

While it’s important to be clear about the scale of the value at risk, focusing solely on it can be demoralising. But turbulent times also bring opportunity. Building a future where eight billion people can all thrive within the safety of planetary boundaries will require ingenuity, investment and a significant role for the private sector. Getting ahead of the coming changes can unlock business value through greater resilience, productivity and growth.

Resilience can drive value by not only helping businesses stay ahead of increasing regulatory demands but also by future-proofing their value chains. By anticipating regulatory changes such as more stringent sustainability requirements, companies can avoid stranded assets and ensure their capital expenditure investments are futureproofed.

Given the scale of risks facing most value chains in our era of polycrisis, building value chain resilience and ensuring security of supply will be increasingly important for business continuity and competitive cost advantage.

Productivity gains from proactive sustainability leadership are often most evident in the cost savings that come from greater operational efficiency, for example, through reducing energy consumption, improving input efficiency or reducing waste. While these gains are typically easier to quantify, other productivity benefits, such as recruiting and retaining the best talent motivated to work for a business that is working to shape a better world, are equally valuable, even if harder to measure financially.

Nurturing business growth from being the preferred choice of your customers is typically a highly competitive arena. Sustainability leadership can serve as a powerful asset to drive brand differentiation and equity.

The power of innovation

Growth may also come from the disruptive innovations needed to urgently reach net zero, regenerate nature, create a circular economy, support good incomes and working conditions across value chains and enable communities and societies to thrive.

Sustainability leadership can inspire innovation teams to move beyond incremental improvements to embrace more radical and game-changing business model innovations or technological breakthroughs to meet ambitious goals.

A clear-eyed assessment of the true value at risk and value to be gained from how you approach the volatility ahead in your business’s operating context is the first step toward making your business fit for the future we’re facing.

James Payne is director, purpose of business, at sustainability organisation Forum for the Future