From Forecasting to Foresight; What 2025 Taught Boards About Governing in Uncertainty

If the past year has proven anything, it is that economic forecasting has become an increasingly unreliable guide for decision-making. For boards and executives, 2025 reinforced a hard truth; the challenge is no longer predicting the future but governing effectively amid sustained uncertainty.

Geo-economic fragmentation is now the baseline

One of the defining features of 2025 has been the acceleration of geo-economic fragmentation. The post-war, rules-based trading system anchored in the World Trade Organization continues to weaken, replaced by a far more transactional and volatile global environment.

The reintroduction of broad-based tariffs by the United States, combined with ad-hoc bilateral negotiations and retaliatory measures, marked a clear shift away from stability toward leverage. Financial markets responded sharply, then adapted; not because risks disappeared, but because uncertainty became normalised.

At the same time, economic competition between the United States and China intensified beyond trade. Capital flows, technology supply chains, rare earths, semiconductors, and AI capability are now explicitly treated as strategic assets. For boards, this has material implications; supply resilience, market access, and geopolitical exposure can no longer be delegated solely to management or treated as second-order risks.

Persistent instability, not isolated shocks

Geo-economic disruption has been accompanied by ongoing geopolitical instability. Fragile ceasefires, protracted conflicts, and rising regional tensions have reinforced a world in which disruption is persistent rather than episodic.

From a governance perspective, this changes the risk conversation. Traditional scenario planning built around discrete shocks is no longer sufficient. Boards must assume overlapping risks; geopolitical, regulatory, financial, and technological pressures arriving simultaneously rather than sequentially.

Markets, AI, and shifting financial regimes

AI-driven optimism has been another defining feature of 2025. Large-scale capital expenditure, stretched asset valuations, and growing links between traditional finance, crypto, and the attention economy have fuelled a sustained risk-on environment.

Whether this proves durable remains uncertain. What is clearer is that the assumptions underpinning market efficiency and capital allocation are being tested once again.

At the same time, political pressure on central banks has intensified across advanced economies. The long-held assumption of central bank independence is no longer sacrosanct, raising questions about inflation control, fiscal dominance, and the stability of macroeconomic policy frameworks.

Despite all this, global growth proved more resilient than expected. Forecasts were downgraded early in the year, then revised upward. Whether this reflects structural resilience or temporary buffers; such as fiscal support, tariff front-loading, or timing lags; remains an open question for 2026.

Australia; relative stability, familiar constraints

Domestically, Australia experienced its own version of disruption. A decisive federal election result delivered political clarity but also reinforced longer-term structural challenges.

The Reserve Bank of Australia cautiously unwound part of its prior tightening cycle, operating under a refreshed institutional framework and a new Monetary Policy Board. Split decisions and unexpected pauses reminded markets that certainty is no longer guaranteed, even at home.

Fiscal settings returned to deficit, with little prospect of structural balance over the coming decade. Productivity concerns resurfaced forcefully, alongside renewed debate about tax reform and economic dynamism. At the same time, Australia committed to materially higher emissions-reduction targets, with profound implications for energy, infrastructure, capital allocation, and transition risk.

What boards should take forward

The lesson from 2025 is not that forecasting is futile; it is that over-reliance on forecasts is risky. Boards that performed best were those that shifted focus from prediction to preparedness.

From a Light Years Agency perspective, future-fit governance in this environment requires:

• greater emphasis on strategic resilience rather than single-path planning

• explicit consideration of geopolitical and geo-economic exposure at board level

• disciplined capital allocation under uncertainty

• governance frameworks that support agility without sacrificing control

The world is unlikely to become simpler in 2026. Boards that accept this, and govern accordingly, will be far better placed than those still waiting for clarity to return.