May 2025
The uncertainty associated with the Trump administration鈥檚 policy initiatives and executive orders, particularly on tariffs and trade, but also on a range of other controversial issues鈥攊ncluding immigration, federal grant funding, foreign policy and aid, climate and other environmental and social issues, healthcare, education, the size of the federal workforce, and more鈥攊s reshaping the economic, geopolitical, and risk environment. 鈥淚ndeed, the speed, quantity, and breadth of executive orders and other policy and regulatory changes have been eye-opening, as have the emerging knock-on effects,鈥� noted one speaker during our April 2025 乐鱼（Leyu）体育官网 Board Leadership Conference.聽
As emphasized during the conference, the level of uncertainty surrounding the administration鈥檚 policy agenda is unprecedented and poses a major challenge for boards and management teams. Perhaps not surprisingly, nearly 80 percent of directors surveyed at our conference did not think their management teams had a clear sense of how the new policy agenda will impact their companies.1
The following observations and insights from directors, business leaders, and luminaries attending our annual conference may be helpful as boards calibrate their agendas in the coming months.2
Tariff uncertainty and knock-on effects
For many companies, perhaps the most significant and immediate challenge is tariff uncertainty鈥攂oth the direct impact of the tariffs on a company鈥檚 supply chain, costs, margins, pricing, and employment, as well as the inflationary effect of US tariffs and any retaliatory tariffs on the US and global economies. As measures of economic uncertainty 鈥渟urpass those of the pandemic,鈥� as one speaker observed, many consumers, large and small businesses, and investors are pausing spending and investment decisions. Amid concerns about inflation, job security, and compressed margins, betting markets have the risk of recession at 39 percent.3
Global growth is projected at 2.8 percent for 2025, a sharp reduction from the International Monetary Fund鈥檚 previous January estimate of 3.3 percent. The same report forecasts US GDP growth for the year at 1.8 percent, down from an earlier forecast of 2.7 percent.4聽And economists are forecasting US growth to drop from 2 percent to 1.5 percent by the fourth quarter.5听The Federal Reserve was expected to reduce interest rates three times in 2025, but now the expectation is for one rate decrease, if any at all. 鈥淭here was postelection exuberance and expectations for deregulation, lower interest rates, M&A, and IPOs, but that is gone,鈥� said a conference speaker. As noted in the Federal Reserve鈥檚 Beige Book report, 鈥淏usiness leaders indicated recent strategy discussions shifted away from capital investments aimed at innovation and efficiency toward a focus almost entirely on mitigating tariff-related risks.鈥�6
This uncertainty regarding US tariff policy鈥攁nd possible retaliatory tariffs鈥攍eads to a wide range of tariff scenarios. Some tariff increases appear inevitable; however, the extent and the scope of measures remain unclear, and their impact on companies will vary widely depending on a number of factors, including industry, supply chain design, and geographic footprint. In this environment, scenario planning is essential鈥攆rom factoring in the effective dates of tariffs and potential cost ranges (best- and worst-case scenarios), to short-, medium-, and long-term actions the company can take to mitigate the impacts (e.g., moving facilities, diversifying suppliers, adjusting prices, renegotiating supplier contracts, or offsetting costs elsewhere in the business).
The implications for the nature and frequency of earnings guidance may also need to be considered.聽
Climate regulation and ESG
Despite the Securities and Exchange Commission鈥檚 withdrawal of defense of its climate rule, many companies may need to make disclosures under state laws or international disclosure requirements. Companies must also consider whether customers who may be required to report Scope 3 emissions will require climate disclosure from the company, whether some investors will continue to demand disclosure, and whether climate issues are material to the company. As they determine how to proceed, companies will need to balance competing demands on climate.聽
Notwithstanding the administration鈥檚 pushback against company ESG and DEI initiatives, many directors view these initiatives鈥攚hich must withstand scrutiny, including as a result of recent Supreme Court decisions, executive orders, and other regulatory actions鈥攁s fundamental to the business and critical to long-term value creation. 鈥淢ost management teams and boards weren鈥檛 focused on ESG just because it was politically correct. It made good business sense,鈥� said one conference speaker.聽
Executive orders and policy initiatives more generally
The number and scope of the administration鈥檚 executive orders reflect aggressive policy shifts beyond tariffs, trade, climate, and ESG鈥攁nd include immigration enforcement, foreign aid, education, healthcare, and more. These executive orders have generated substantial legal challenges, resulting in injunctions and appeals. While these cases work their way through the legal system, corporations face continued uncertainty about how to proceed in the short term and the long term.
While discussions about the uncertainty associated with the administration鈥檚 executive orders and policy initiatives may encompass many elements鈥攕trategy, risk management, risk appetite, crisis readiness and resilience, etc.鈥攁nd vary by company, directors and business leaders attending the conference highlighted the following three key areas of board focus as they help guide their companies through the turbulence:
- Scenario planning:聽Directors highlighted the importance of scenario planning to help companies make informed decisions and prepare for potential disruptions by considering a wide range of tariff outcomes and other scenarios. They emphasized the need for the board to help ensure that the scenario planning process is properly resourced with the right expertise, management鈥檚 aperture is wide enough to capture the different scenarios (across multiple time horizons), scenarios are discussed in context (i.e., the business landscape, risk environment, and company鈥檚 strategy), the process is iterative, and independent third-party voices are heard. A challenge is 鈥渃utting through the noise鈥濃攅.g., avoiding information overload, considering too many scenarios, and poor information quality. Data is the starting point for scenario planning, but context and judgment are critical.
Generative artificial intelligence can be an important tool in this process, but management鈥檚 judgment is essential.
- Engagement with the government, investors, and stakeholders:聽Directors also emphasized the need for boards to encourage management to engage with government officials鈥攊ncluding members of the current administration and elected representatives on both sides of the aisle鈥攖o educate them about how policies will impact the company, the industry, and the economy more generally. One panelist encouraged companies to engage with the administration privately through a carefully designed action plan, and comment on the policy, not the individual. Management also needs to engage with investors and key stakeholders to educate them concerning the potential impact of the administration鈥檚 policy initiatives on the company鈥檚 strategy and performance.
Companies will also need to reassess the impact of the policy initiatives on earnings guidance, which is becoming more difficult due to economic and geopolitical developments.
- Supporting the CEO:聽The board should be in a position鈥攄rawing on the skills and experiences of its members鈥攖o offer guidance and support as the CEO navigates this period of disruption and uncertainty. An important question for many CEOs is whether and when to speak out regarding the administration鈥檚 policy positions鈥攑articularly controversial positions鈥攖hat may have a significant impact on the company. As many companies have experienced firsthand, the consequences of speaking out鈥攐r remaining silent鈥攃an be significant.
Along with navigating the immediate challenges, companies should keep sight of the broader, longer-term implications of major US policy shifts鈥攆rom the impact on the US dollar鈥檚 standing and confidence in the US as a reliable marketplace, to the implications for the labor market, energy transition, and critical infrastructure, as well as the company鈥檚 business model and strategy. Boardroom discussions focused on the macro and micro, across multiple time-horizons, will be essential.
