Issue Geopolitical distance becomes an input to organizational design

Summary

McKinsey proposes that organizations measure their geopolitical distance and use it when designing their structures. The concept refers to how closely the foreign policy stances of a company's home country align with, or diverge from, those of the countries where it operates. A larger distance signals greater exposure to tariffs, sanctions, or export controls that can interrupt growth and operations. The report suggests using this measure to decide which capabilities to centralize, separate, or duplicate. Examples include regional hubs, mirrored structures in distant markets, and independent legal entities that can respond to local laws. McKinsey stresses that such choices involve trade-offs among growth, efficiency, and risk tolerance that must match each company's strategy.