Biden drops out – businesses should be scenario planning

Control Risks’ most well-prepared clients have been running risk workshops, simulations and crisis management exercises to ensure business continuity and plan effectively for any US election-related scenario — from security incidents to geopolitical disruptions to impactful policy shifts that have the potential to affect their business strategies and operations. Joe Biden’s withdrawal from the race is yet another example of volatility in the 2024 US operating environment, and points to the importance of being prepared for all election outcomes.

Unprecedented move

Biden is the first president eligible for re-election to withdraw since former president Lyndon Johnson did so in 1968, and the first to withdraw so late in the election year (Johnson withdrew in March). Biden had been under increasing pressure from key party figures and donors to withdraw from the race following a poor performance in the first presidential debate following months of criticism from key segments of his voter base.

Harris endorsement and legal challenges

Biden’s endorsement of Vice President Kamala Harris does not guarantee that she will be the Democratic nominee. Rather, his withdrawal from the race releases his pledged delegates, won during the primary elections, to vote for other candidates. Under party rules, alternate candidates must obtain signatures from delegates from multiple states to be recognized and then be nominated by a majority of all delegates. The DNC, where the party’s presidential candidate will formally be nominated, is scheduled for 19-22 August in Chicago.

In the 48 hours following Biden’s announcement, Harris secured endorsements from more than 80% of Democratic Representatives and Senators, as well as potential contenders, such as California Governor Gavin Newsom and Michigan state Governor Gretchen Whitmer. Only four Democratic members of Congress have called for an open primary but, even if there is a competitive process, Harris has reportedly secured support from a majority of DNC delegates. Given this, it is likely that she will be nominated without a competitive process — the Democrats will seek to avoid intra-party divisions and ensure that she has access to Biden’s campaign funding since transferring such resources to another candidate could be contested under existing campaign finance laws.

Republican Speaker Mike Johnson has suggested that the Republican Party could launch legal challenges to keep any Democratic presidential candidate other than Biden off state ballots. Such challenges are likely to be brought – this election cycle has already seen a slew of court battles on everything from ballot initiatives to voting methods – but are unlikely to succeed. The Democratic Party had not yet officially nominated Biden, very few legal experts believe that the party cannot change its nominee, and the state supreme courts that would decide such challenges in key swing states either have Democratic majorities or are non-partisan.

Election impact

Polling had showed a close race between Biden and former president Donald Trump), though Trump has held a consistent lead at both a national level and in key swing states. Indeed, the polls have shown remarkably little volatility in recent months despite other major events such as Trump’s felony criminal conviction on May 30th and assassination attempt on July 13th. The highly polarized electoral landscape may mean that even the unprecedented event of Biden’s withdrawal may not prompt a significant shift; polls conducted on a hypothetical Harris-Trump matchup show little change.

Until Democrats officially nominate a presidential and vice-presidential candidate, polling over the coming weeks is likely to be a less reliable signal of the state of the race. Regardless of the outcome of the DNC, fundamental political factors shaping the election – such as voters’ concerns about inflation and social issues, including abortion, immigration and crime – will remain. The election remains likely to be decided by narrow margins in a few swing states.

The outcome of the election and the policy positions of the incoming president will have significant implications for international diplomacy, supply chains and commerce that no organization is isolated from – whether operating in the US or not. It is clear that a holistic, scenario-based risk management approach is essential to doing business through the US elections and beyond.