The evolving dynamics between the U.S. and China are reshaping the business environment. It is important for leaders to navigate this new terrain with strategic acumen. The recent clampdown on U.S. consulting firms in Beijing, including Mintz Group and Bain & Co., underscores a growing trend of geopolitical tensions manifesting as direct threats to American businesses operating in China. Stringent data privacy laws and tit-for-tat sanctions are affecting key industries. The landscape is fraught with challenges that require a reevaluation of our global strategies.

Yes, as a leader you must navigate business risks. You must also understand the broader implications of this shifting global power balance. U.S. firms will recalibrate their presence in China amidst these uncertainties. Now, the question is how do we maintain a competitive edge while safeguarding our interests?

You must now consider diversification. Diversify in markets, sourcing, and innovation. All three are needed to fortify against these compounding geopolitical risks. The lesson here is clear, agility, foresight, and the readiness to adapt are crucial. For an in-depth exploration of how U.S. business leaders are responding to these challenges and adapting to the new reality in China, read my article The China dilemma: U.S. CEOs face whiplash and tough choices as tensions mount for Fortune Magazine.