Markets are increasingly shaped by policy and geopolitics. Public Affairs is now strategic. Organisations need agility, credibility and foresight to manage risks and capture new opportunities

Financial markets are shaped by sustainability regulation.

A business leader recently remarked, "We used to track competitors and markets. Now we track governments, geopolitics, and policy with the same intensity." That sentence captures a fundamental shift in the relationship between markets and policy.

Over the past year, businesses across the world have been reminded of how fragile and interconnected the global economy really is. Conflicts in the Middle East have affected energy prices. Disruptions in key shipping routes have increased freight costs and delivery times. Supply chains are being restructured not only for efficiency but also for resilience. Export competitiveness in many sectors is being influenced not just by productivity but also by trade policy, logistics disruptions, and geopolitical alignments.

These developments reveal an important reality: markets today are not shaped by economics alone. They are influenced by geopolitics, geoeconomics, public policy, regulation, and global events.

For decades, companies operated in a world where markets dictated decisions and policy followed. Regulation responded to market developments. Public policy was often seen as an external factor, not a strategic one. Corporate strategy focused on competition, costs, capital, and growth, while public policy and advocacy were largely reactive functions that dealt with regulation when it appeared.

That paradigm has now shifted. Today, public policy not only regulates markets but increasingly shapes them. Strategy today is as much about reading policy signals and geopolitical developments as it is about reading market signals.

Technology companies are shaped by data regulation and competition policy. Manufacturing is influenced by trade policy, tariffs, and localisation requirements. Financial markets are shaped by sustainability regulation. Energy companies operate at the intersection of climate policy, geopolitics, and global conflicts. Oil prices are influenced not only by demand and supply but also by tensions in the Middle East. Shipping routes and freight costs are affected by geopolitical tensions and disruptions in key maritime corridors.

We are no longer operating in a purely economic world. We are operating in a policy-driven and geopolitically influenced economy where political decisions, conflicts, sanctions, shipping disruptions, and regulatory changes can reshape entire markets almost overnight.

In this environment, Public Affairs, public policy, and advocacy are no longer support functions. They are strategic functions. There are several shifts that explain this new reality.

From Managing to Anticipating Policy

Traditionally, Public Affairs functions focused on government relations, communications, and stakeholder engagement. Public policy engagement was often reactive - tracking policy, responding to regulations, managing issues, and maintaining relationships.

Today, that is no longer sufficient. The real role of Public Affairs is to interpret policy signals, anticipate change, and help organisations prepare for it. Increasingly, many CEOs themselves are directly engaged with these issues.

In many boardrooms, some of the most important strategic questions are no longer purely commercial. They are policy and geopolitical questions. Will regulation allow this business model? Will geopolitics disrupt this supply chain? Will policy incentives make this investment viable? Will carbon regulation change cost structures? Will a geopolitical crisis affect shipping routes and logistics costs? Will trade policy affect exports?

These are not communication questions but strategy questions. Public Affairs increasingly sits at the intersection of business strategy, public policy, and geopolitics.

From Access to Credibility

For a long time, corporate engagement with government was often misunderstood as being about access. But policymaking has become far more complex and multi-stakeholder driven. Today, access alone has very little value.

What matters is credibility, insight, and the ability to contribute constructively to public policy discussions. Governments are dealing with complex trade-offs such as growth versus sustainability, innovation versus regulation, and global integration versus domestic resilience. They increasingly engage with organisations that bring data, global experience, and implementable solutions.

In this environment, effective public policy advocacy rests on three pillars: knowledge, relationships, and credibility. Access without knowledge does not last. Knowledge without relationships does not travel. And without credibility, neither works.

Trust, therefore, is not merely a reputational concept but a strategic asset.

From Advocacy to Co-Creation

Another important shift is the move from advocacy to co-creation.

Earlier, industry advocacy was often about arguing for specific regulatory outcomes. But policymaking today is too complex for narrow advocacy. Governments are looking for partners who can help design workable frameworks, not just stakeholders who support or oppose policies.

The most effective Public Affairs and policy teams today are those that participate in consultations, contribute research, share global best practices, and help governments design policies that are practical and implementable. Policies that are co-created are usually more durable, practical, and widely accepted.

A T20 Approach to Public Policy Engagement

Traditionally, public policy engagement has always been seen as a long-term process. Building relationships, credibility, and trust with government and institutions takes time and requires sustained engagement. In many ways, public policy engagement has historically been more like a Test match - patient, strategic, and played over a long period.

However, the global environment is changing much faster today - geopolitical tensions, technology disruptions, supply chain shifts, climate commitments, and economic shocks are forcing governments to respond more quickly than before. Policymaking is becoming more dynamic and responsive to global developments.

As the IPL season begins and the country moves into T20 mode, the analogy is quite relevant. Public policy engagement today still requires the patience of a Test match, but increasingly it also requires the agility of a T20 game - quick decisions, fast responses, and the ability to adapt to changing situations. If policymaking continues to accelerate, who knows - we may even move from Test matches to 50 overs to T20 and perhaps one day to T10 policymaking.

We are already seeing governments becoming nimbler. In India, for example, the government has constituted multiple groups of secretaries and inter-ministerial committees to respond to emerging global trade, supply chain, and economic challenges. This reflects a broader shift - policymaking today increasingly requires faster coordination and quicker responses to global developments.

For organisations, this means public policy and advocacy must also become more agile and responsive. Policy engagement still requires long-term credibility and relationships, but it now also requires the ability to respond quickly, interpret policy signals early, and engage in fast-moving policy environments.

Public policy engagement today therefore requires both - the patience of a Test match and the agility of a T20 game.

Crafting Tomorrow

If there is one defining idea of Public Affairs today, it is this: the function is no longer just about managing risk or reputation. It is about understanding how the world is changing and helping organisations position themselves for that future

The organisations that will succeed in the coming decade will not necessarily be those with the most detailed strategic plans. They will be those that understand the policy environment early, engage constructively, build credibility with stakeholders, and position themselves ahead of policy, geopolitical, and societal shifts.

Because in today's world, competitive advantage will increasingly come not just from market strategy, but from understanding the public policy environment in which markets themselves are being shaped.

Markets no longer shape policy. Increasingly, policy shapes markets.

Ajay Khanna is the co-founder, Public Affairs Forum of India (PAFI). The views expressed are personal