The Nordic region is often viewed as an attractive investment environment with strong regulatory governance characterised by entrepreneurialism and innovation. However, in a Europe beset by geopolitical risk and political instability, the Nordics are not immune to the impacts of (geo)political and reputational risks.
Two risk trends will impact doing deals in the region:
- Trade uncertainty following Donald Trump’s return to the US presidency. The key concern is around trade. As Trump’s willingness to use the future of Greenland as leverage demonstrates, Nordic countries could find themselves caught up in an escalating trade war that would affect supply chains and end markets.
- Rapid growth hits limited talent pools and high labour costs. The relatively sparsely populated Nordic countries have limited talent pools while also facing high labour costs. This creates organisational challenges as innovative and successful firms scale their technologies and solutions. Internationalisation and outsourcing are often the solution. However, investors must be aware of pressure on corporate culture, workers’ rights and well-being, and financial crime, especially in jurisdictions with high perceived risks of corruption and fraud.
Let’s look at each of these in turn.
Trade uncertainty under Trump 2.0
The tone in the dialogue between the US administration and the Danish government demonstrates that no region is immune to the potential impacts of a looming trade war. Whether or not Trump goes ahead with tariffs against Denmark for its refusal to countenance handing over Greenland to the US, the threat alone is enough to undermine investor confidence.
As global institutionalists and EU members, the continental Nordic countries will want to respond and react through institutional channels. However, global developments will add to Europe’s competitiveness problems and trigger regulatory unpredictability as the EU works out how to respond. The lack of strong EU leadership adds to policy uncertainty, and developments in Europe, such as the German elections, have the potential to complicate the picture further.
Within the Nordics, the next two years also have the potential for political change, with the Norwegian elections due in September and Denmark and Sweden gearing up for elections in 2026. Amid a surge in gang-related and politically motivated violence, the Swedish ruling coalition is under pressure to contemplate policy measures to reassure the general public, similar to other right-leaning populist governments in Europe and elsewhere.
Meanwhile, the regulatory response to geopolitical developments will continue to impact the investment environment, such as through a continued focus on national security via FDI screening and the implementation of new requirements relating to critical infrastructure. Keeping a finger on the political pulse—both on national and sectoral levels—will be increasingly important.
The risks of rapid growth
Many Nordic startups and maturing companies are recognized for their innovation and growth, not the least for countering environmental and societal challenges. These initiatives range from sustainable batteries and green steel to cutting-edge technology and software. Many also have far-reaching commitments to sustainability goals and other impacts.
However, growth comes with its own challenges. Policy-driven corporate culture may be diluted in periods of fast growth if onboarding is not thorough or when many employees come from contexts with a different cultural base in commerce. Sweden is the largest of the Nordic countries but only has around 10 million people. In contrast, Norway, Denmark and Finland have less than 6 million people each (and Iceland only around 400,000), so reliance on outsourcing or imported talent is a reality for rapidly scaling firms.
While this model offers increased flexibility and potential cost savings, it can quickly become problematic if the company lacks adequate screening procedures when onboarding partner firms. In a recent example, two companies in the consumer goods industry found evidence of senior managers hiring consultants linked to family members or close acquaintances, often at above-market prices and without a procurement process.
This type of corruption is perceived as increasingly prevalent, with both Sweden (again) and Norway slipping in Transparency International’s corruption perception rankings (Denmark and Finland have not, and in fact occupy the two top spots as perceived as least corrupt, globally).
In another case, a Nordic-headquartered green technology company’s rapid scaling resulted in difficulty finding qualified labour, leading to high pressure on existing staff, resulting in local language press allegations of violating workers’ rights, having of a toxic working culture, ignoring health and safety violations leading to workplace accidents, and procurement of minerals from a miner with a poor environmental track record and ties to a sanctioned individual.
Such growing pains may not be immediately apparent, and the prior presence of reputable local and international investors is no guarantee that policies are in place (let alone followed), especially not if supply chains extend far across borders.
Learn more about how we can support your organisation. With native Nordic language speakers based in Copenhagen and at our headquarters in London, Control Risks has been present in the Nordics for over twenty years and regularly advises companies and investors on political and reputational risks, both inbound and outbound.