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Hosni Mubarak Is Out, and Here's What Smart Executives Need to Consider. Fast

After 30 years in power, Egyptian President Hosni Mubarak resigned, handing power to the military. Weeks of intensifying protest finally did what no other opposition in the last 30 years was able to accomplish. And the question for business people is: What now?

Given the possibility of spreading political instability, increased oil prices, shipping uncertainties, changing international and domestic policies, or the incredible implications of social media, executives have plenty to think about. Any time the world changes -- and this is some pretty enormous change -- companies need to reevaluate their strategy and expectations.

Most obvious are the immediate geopolitical ramifications. Egypt has had one of the more pro-Western governments in the region. Good for its people? Maybe not. But it's definitely something that most businesspeople have assumed wasn't going anywhere soon.

Here are some immediate considerations:

  • The Chinese government has blocked news of developments in Egypt from its citizens because it's concerned about keeping power. Can it continue to keep this news out? Maybe not. Some of the same factors -- food prices and availability -- are present. There's even a growing unemployment problem among Chinese university graduates. When people are hungry and desperate enough, they become fearless because there is nothing left to lose. And China is the center of outsourced manufacturing, so public disruption could be serious..
  • Who will control Egypt? Hossam Badrawi, secretary general of Mubarak's ruling National Democratic Party, quit, saying that the country needed new political parties. In short, politics there are now completely up in the air. Does the military continue to rule indefinitely? It wouldn't even act to stop the demonstrations. And who will now run the Suez Canal? Only a tiny percentage of oil moves through the canal, but many other goods do.
  • Politics in the rest of the Middle East are also up in the air. Syria dodged a planned "day of rage" ... for now. But protests have appeared in Lebanon, Yemen, and Algeria. Changes in the region can easily spark either oil-supply disruptions or rising crude prices because of fear that uprisings will spread.
  • Many Middle Eastern countries have large sovereign wealth funds. Will they suddenly pull out money because they need liquid funds? (Similarly, it might turn out to be a great time to be running a Swiss bank.)
At the very least, continued high oil prices will affect all businesses either directly, because they use petroleum in the products and processing, or indirectly because of transportation costs. Let the prices go high enough for long enough, and many companies might find that domestic manufacturing actually becomes economically more feasible than outsourcing.

Changes in political systems also mean shifts in how all countries undertake foreign and domestic policy. The variety of potential implications for industries is staggering:

  • travel restrictions
  • restrictions on imports or exports
  • changes in foreign aid, particularly in the form of military equipment
  • growing negative attitudes toward a country and the companies associated with it
  • nationalization of industries.
The point is not to be a Chicken Little, crying about the sky falling. But prudent corporate risk management needs regular scenario planning. When the ground starts shifting this quickly, expect that spreadsheet to be doing heavy overtime.


Image: Flickr user Dennis Jarvis, CC 2.0.
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