Much of Asia has so far been relatively sheltered from the Ukraine conflict fallout. The fear of wider conflict feels more distant than in Europe, the shock to energy supplies is less direct and immediate, and food insecurity is not yet as palpable as in some regions. This sense of insulation is unlikely to last, with the impact on supply chains and prices mounting as the crisis drags on. So far, however, Taiwan has been perhaps the most talked-about geopolitical risk concern in Asia arising from the Ukraine situation. 

Control Risks has received more questions about Taiwan in the past four weeks than in the past two years. This sudden surge in concern is highly disproportionate to the increase in actual conflict risks, which are very low and have not changed substantially. This is starting to be better understood, as more observers point out the huge differences between the Ukraine and Taiwan situations. But in discussions we are highlighting several points that few organizations seem focused on. 

On the cross-Strait question, two stand out. Firstly, for planning and monitoring purposes, firms should fixate less on “will there be a war?”, and also consider scenarios such as a more limited military action or other crisis. Second, most firms looking at Taiwan conflict risks are focused on their Taiwan presence, but in a major conflict or crisis most MNCs would have vastly greater exposure in mainland China and the wider region. This raises a bigger issue: Taiwan is just one of Northeast Asia’s flashpoints (and not necessarily the most pressing); a major crisis over any would have regional and global implications.

Forgotten flashpoints

North Korea, in particular, has a long history of being ignored for years at a time, until a crisis hits the headlines and people panic. In the context of the Ukraine situation and with a more hawkish South Korean president set to take office in May, Pyongyang’s 24 March ICBM test – its first since 2017 – may portend another escalation cycle this year. This has been brewing for a long time, but Korean peninsula risks have drawn little attention since the Trump-Kim dramas of 2017-19, when the two leaders exchanged nuclear threats, and later historic handshakes and “beautiful letters”. 

Territorial disputes in the South and East China Seas, and the China-India border are also long-standing sources of friction. In all the above cases, the risk of a major conflict is very low, but potential triggers for crises abound. Escalation could be harder to contain in today’s geopolitical environment than in past episodes. These risks require a broad, systematic approach, rather than a narrow reactive one when a specific risk is in the news. Organizations with particular exposure or concerns on one of these hotspots should of course assess these specifically. But ideally, companies should have a broader view: 

  • As with the Taiwan case, it is vital to look beyond local impacts. A major escalation in Korea or over maritime sovereignty disputes is not just a worry for a Seoul office or a South China Sea energy operation. If an illustration was needed, a dramatic one is in focus now, as organizations with no presence or direct exposure in Ukraine are greatly impacted by events there. 
  • Those events also highlight why planning should look beyond physical security. Since these regional hotspots tend to be viewed mainly in terms of conflict risk itself, they are sometimes left to security departments to address (financial market investors are an exception). But the implications of a crisis in Northeast Asia would go far beyond local physical security impacts. 


This is besides the potential for major global disruption if enforcing sanctions on Russia spills over into US-led targeting of China, prompting a resumption of escalation in US-China frictions. Both sides would prefer to avoid this. A month into the conflict, Washington and Beijing are essentially undecided on how far they will push each other’s tolerance, and hoping for a settlement before they are forced into harder choices. If ‘sanctions contagion’ does emerge, it could leave multinationals in China caught between conflicting regulatory and political pressures, and tit-for-tat punitive measures that might go beyond those already seen since 2018. This is a crucial area to watch, and one of the other most frequent topics of our Ukraine-triggered work with clients in Asia, though it is not the focus of this article. 

The indispensable region

It would be crass to ‘rank’ the huge magnitude of the Ukraine crisis, which is above all human, and may yet worsen or widen. But comparisons of potential economic impact are a sobering clue to the likely disruption from a conflagration in Northeast Asia. The business fallout from Russia-Ukraine conflict (together they account for roughly 2% of global GDP and 2.6% of goods exports) is already severe. So consider the likely disruption from a conflict in Northeast Asia, which accounts for more than 25% of global GDP (slightly more than the US), and roughly the same proportion of global goods exports. MNCs have far greater exposure in terms of people, offices, suppliers, manufacturing, assets and investments.

Crisis scenarios are daunting, whatever the trigger and location, and whether it starts with military or economic escalation. Impacts on the world economy would be very different from the current crisis. Northeast Asia is the world’s largest energy importing region, home to the world’s top semiconductor makers, a critical hub in the manufacturing and supply chains of most MNCs, and a major market for many. China is the top producer of items from aluminium, steel, polysilicon and some rare earths, to electronics, machinery, plastics, medical apparatus and essential household goods. Stages of the COVID-19 pandemic showed what disruption to the ‘workshop of the world’ does to global supply chains.

China is the world’s largest exporter, but also part of a highly interconnected regional economy involving Japan, South Korea and Southeast Asia. Connections and contagion risks are not only economic. US alliances with Japan and South Korea (and its less-binding commitments to Taiwan), mean that a conflict here would be more likely to draw in the US than the one in Ukraine. A Korea conflict, for example, would draw in the world’s three largest economies (the US, China and Japan). South Korea is the tenth-largest, while Russia (eleventh) borders North Korea and would be at least indirectly affected. 

The Taiwan case

Having started with questions on Taiwan, a brief recap is in order of why conflict in Ukraine has not significantly increased the risk of cross-Strait conflict. In short, there is simply no direct link or trigger. This might change if the crisis in Europe widens to a major, direct NATO-Russia military conflict, pulling in US military resources from other regions, and distracting Washington enough to seriously undermine its capacity to defend Taiwan. Short of that – and arguably even then – Beijing’s bottom-line calculation remains the same: moving to forcibly seize control of Taiwan is too risky. And at least so far, Russia’s Ukraine experience is a deterrent example, rather than a temptation to high-stakes strategic gambles. 

To be clear, long-term risks regarding Taiwan have been rising for years. China has expressed growing frustration as prospects for peaceful unification have evaporated. Meanwhile, the cross-Strait military balance has moved steadily in Beijing’s favour, the US commitment to Taiwan is increasingly questioned, and naval and air force traffic in the region has increased. One of the more valid comparisons with the Ukraine case is that many Chinese leaders, like Russia’s, believe deeply in the historic justness – and the strategic value – of reunifying what they consider territory and people detached by foreign interference.

Despite all this, Beijing is highly unlikely to attempt taking Taiwan by force any time soon. Its strategists may doubt US resolve to fight for Taiwan, but must still take the possibility very seriously. It would risk a major conflict that could threaten decades of Chinese development, prosperity and global influence gains, and possibly even domestic political stability. Taiwan is a ‘core interest’, but not so vital that Chinese President Xi Jinping will pursue it at the cost of severely jeopardizing multiple other critical priorities. True, similar logic was a factor in expectations about Russia which proved wrong. But Xi has no record of military adventurism, and much to lose: China is already on course to rival US power if it continues its historic rise, but a war on its doorstep could change that trajectory. 

Missing the main(land) risk

As with the wider risk of flashpoints in Northeast Asia, the severe potential impact of conflict scenarios, and increased uncertainty in the current geopolitical climate, mean Taiwan risks warrant monitoring and contingency planning despite the low likelihood of war. But this should not focus on the vague idea of Ukraine developments being a trigger. They certainly threaten to intensify US-China tensions, but these will play out mostly in other well-established spheres of competition. Monitoring should instead focus on developments that could alter fundamentals, or trigger a spike in frictions specifically over Taiwan, such as big upgrades in US support to Taipei, or perhaps most worrying, an accidental air or sea collision. 

Nor should planning and monitoring fixate only a full-scale “invasion” scenario while overlooking more limited – but somewhat less improbable – crisis scenarios. Besides a potential air or naval incident or stand-off, these include a major rhetorical escalation; attacks on or seizure of a Taipei-administered outlying island, or major cyberattacks. For a brief period on 3 March, some organizations were suddenly contemplating the latter when Taiwan’s power grid failed (though the real cause was mundane).

The most surprising thing about businesses’ new attention to Taiwan is the tendency to overlook the biggest area of exposure for most organizations in the event of a major crisis. Among the requests we receive for advice, risk assessments or planning support on cross-Strait conflict risks, roughly 80% are from clients who are thinking only or primarily about threats to their Taiwan operations, usually driven by recent media coverage of parallels between Ukraine and Taiwan. But for most multinationals, a Taiwan conflict, or potentially a more limited escalation crisis, would above all be a wider China crisis. As with the other flashpoints, we stress the very low likelihood of a war, but there are credible and highly consequential scenarios here that few businesses have seriously thought through and prepared for.

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