After decades of globalization, firms are refocusing on local markets and new forms of cross-border collaboration are taking shape. Technology is driving integration as trade barriers rise; financial innovation is accelerating amid monetary realignment and volatile geopolitics; and the green transition is redrawing both energy markets and fiscal priorities.
Edition 62 focuses on a new world order that is emerging amidst these tectonic shifts – and on how the financial services and energy sectors are rethinking old ideas and staking out new ground in response.
This Journal edition collects articles which deal with these issues, clustered into four broad sub-themes:
- Colliding worlds - illustrating how finance, energy and infrastructure need to be viewed through an integrated perspective
- Monetary machinations - looking at central banks and currencies sensitivity to cross-border economic flows
- Strategic pivots - highlighting how organizations adapt to regulatory and policy fragmentation
- Private markets - exploring how the worlds of private equity and venture capital are repositioning themselves in the new global order.
As a firm that has been at the cutting edge of innovation for nearly three decades, Capco is proud to be embracing these new realities despite the challenges the new world order effects.
Featured Papers
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‘No meal without rice’: industry alignment and infrastructure in Chinese bitcoin mining
Ruowen Xu | Assistant Professor, Warwick Business School, University of Warwick
Alex Preda | Professor, Department of Sociology and Social Policy, Lingnan University
This paper examines the infrastructure of bitcoin mining, the proverbial ‘rice’ that anchors the production of crypto assets. While debates about bitcoin have focused on value, speculation and energy consumption, far less attention has been paid to the material infrastructures that make mining possible.
Drawing on interviews with early miners, follow-up interviews with Chinese miners who later migrated to the United States, and a two-week ethnographic study of site construction in Ohio, we analyze how mining infrastructure has been built, reorganized and industrialized over the past fifteen years.
We argue that this evolution has been shaped by four forces: geopolitical realignments, opportunity-seeking across mining and adjacent sectors (especially energy and hardware), intensifying competition for speed and efficiency, and the consolidation of mining into a capital-intensive industrial sector. Together, these dynamics have transformed mining from a flexible, experimental activity into an increasingly corporatized form of industrial production.
The paper shifts attention from cryptocurrencies as financial objects to the infrastructures that sustain them, showing how mining is now organized around the industrial constraints of construction, energy, logistics and capital coordination. In doing so, it foregrounds the persistent temporal tension between intersecting material markets, speculative expectations of rapid returns and the slow, costly work of building and sustaining durable infrastructural systems.
Alex Preda | Professor, Department of Sociology and Social Policy, Lingnan University
This paper examines the infrastructure of bitcoin mining, the proverbial ‘rice’ that anchors the production of crypto assets. While debates about bitcoin have focused on value, speculation and energy consumption, far less attention has been paid to the material infrastructures that make mining possible.
Drawing on interviews with early miners, follow-up interviews with Chinese miners who later migrated to the United States, and a two-week ethnographic study of site construction in Ohio, we analyze how mining infrastructure has been built, reorganized and industrialized over the past fifteen years.
We argue that this evolution has been shaped by four forces: geopolitical realignments, opportunity-seeking across mining and adjacent sectors (especially energy and hardware), intensifying competition for speed and efficiency, and the consolidation of mining into a capital-intensive industrial sector. Together, these dynamics have transformed mining from a flexible, experimental activity into an increasingly corporatized form of industrial production.
The paper shifts attention from cryptocurrencies as financial objects to the infrastructures that sustain them, showing how mining is now organized around the industrial constraints of construction, energy, logistics and capital coordination. In doing so, it foregrounds the persistent temporal tension between intersecting material markets, speculative expectations of rapid returns and the slow, costly work of building and sustaining durable infrastructural systems.
Central bank digital currencies in an era of financial fragmentation: assessing the potential financial crime risks
Joshua Tjeransen | PhD Candidate, King’s College London
Central bank digital currencies (CBDCs) are an emerging financial innovation. Developed and issued by central banks, their purpose is to act as digital cash, ensuring the uniformity of money amid declining cash usage. Initially designed for domestic use, international applications have been debated and piloted.
However, in an era of financial fragmentation and increasing monetary sovereignty, several financial crime risks need to be considered by CBDC developers, policymakers, regulators and financial institutions. Anticipating these risks is crucial if the associated harms are to be minimized and the success of CBDCs is to be ensured.
Central bank digital currencies (CBDCs) are an emerging financial innovation. Developed and issued by central banks, their purpose is to act as digital cash, ensuring the uniformity of money amid declining cash usage. Initially designed for domestic use, international applications have been debated and piloted.
However, in an era of financial fragmentation and increasing monetary sovereignty, several financial crime risks need to be considered by CBDC developers, policymakers, regulators and financial institutions. Anticipating these risks is crucial if the associated harms are to be minimized and the success of CBDCs is to be ensured.
The trade imbalance network and currency fluctuations
Ai Jun Hou | Professor of Finance, Stockholm University
Lucio Sarno | Professor of Finance, University of Cambridge and CEPR
Xiaoxia Ye | Professor of Finance, University of Nottingham
In a rapidly evolving global economy, understanding how global trade imbalances shape currency movements is increasingly important for investors and policymakers. This paper develops a new framework linking countries’ positions in the global trade network to exchange rate fluctuations and currency risk premia.
Extending standard two-country models to a multi-country setting, we show that a country’s centrality within the global trade imbalance network determines how much currency risk financial intermediaries must bear. This leads us to construct the Centrality-Based Characteristic (CBC), a novel measure that captures how a country’s trade interconnections influence its currency’s riskiness.
Using data on 41 currencies from 1995 to 2021, we find that CBC is a powerful and robust predictor of future currency returns. High-CBC currencies systematically earn higher risk premia, and a strategy that goes long high-CBC and short low-CBC currencies delivers an annualized Sharpe ratio of 0.65, outperforming traditional approaches such as carry trades and bilateral trade measures.
Counterfactual analyses of the U.S.–China trade war and the Russia sanctions illustrate how geopolitical shocks reshape trade networks and spill over to third-party currencies. For practitioners, especially financial intermediaries involved in international transactions, CBC offers a new, theory-based signal to enhance currency allocation and risk management. For policymakers, it provides a tool to assess external vulnerabilities and systemic importance. Overall, the framework highlights the critical role of global trade interconnections in shaping currency dynamics.
Lucio Sarno | Professor of Finance, University of Cambridge and CEPR
Xiaoxia Ye | Professor of Finance, University of Nottingham
In a rapidly evolving global economy, understanding how global trade imbalances shape currency movements is increasingly important for investors and policymakers. This paper develops a new framework linking countries’ positions in the global trade network to exchange rate fluctuations and currency risk premia.
Extending standard two-country models to a multi-country setting, we show that a country’s centrality within the global trade imbalance network determines how much currency risk financial intermediaries must bear. This leads us to construct the Centrality-Based Characteristic (CBC), a novel measure that captures how a country’s trade interconnections influence its currency’s riskiness.
Using data on 41 currencies from 1995 to 2021, we find that CBC is a powerful and robust predictor of future currency returns. High-CBC currencies systematically earn higher risk premia, and a strategy that goes long high-CBC and short low-CBC currencies delivers an annualized Sharpe ratio of 0.65, outperforming traditional approaches such as carry trades and bilateral trade measures.
Counterfactual analyses of the U.S.–China trade war and the Russia sanctions illustrate how geopolitical shocks reshape trade networks and spill over to third-party currencies. For practitioners, especially financial intermediaries involved in international transactions, CBC offers a new, theory-based signal to enhance currency allocation and risk management. For policymakers, it provides a tool to assess external vulnerabilities and systemic importance. Overall, the framework highlights the critical role of global trade interconnections in shaping currency dynamics.
Bilateral central bank swap lines and their implications for the global financial order
Ayca Zayim | Associate Professor of Sociology, Mount Holyoke College
Are we moving toward a post-neoliberal global financial order? This article discusses the implications of the rise of China and bilateral central bank swap agreements for global financial governance. It begins by surveying the workings of swap lines and the key role of the U.S. and China in the emergent international swap network. It shows that China’s rise as a swap partner has enabled national governments to bypass the IMF and other multilateral institutions of the neoliberal order and pursue policies that diverge from neoliberal orthodoxy.
In some cases, China’s liquidity support has even enabled authoritarian or illiberal regimes to sustain themselves. I join others in arguing that the rise of illiberalism around the world, including the recent developments in the U.S., suggests a discontinuity with neoliberalism. Nonetheless, it is premature to pronounce neoliberalism dead. On the one hand, China poses a limited threat to U.S. hegemony, given the uncertainty surrounding the long-term sustainability of China’s bilateral swap agreements.
On the other hand, it is reasonable to expect the U.S. to continue supporting a liberal global financial order, given its long-standing financial interests and the U.S. dollar’s continued hegemony.
Multinationals in stormy waters: lessons from Central Europe to navigate the populist wave
Gerhard Schnyder | Professor of International Management & Political Economy, Loughborough University
Tariffs, trade wars, (re-)nationalizations, and other nationalist political interventions in the economy create huge costs for firms, especially those who do business across borders. The second Trump administration is at the forefront of such nationalist economic policies, leaving companies reeling and scrambling to change their business models and restructure their supply chains.
In East Central Europe (ECE), national populist governments have implemented such policies for over a decade. Therefore, the region can provide important lessons on the impact of populists on multinational companies (MNCs). One thing that emerges clearly from academic research is that MNCs in the financial services sector are particularly exposed to national populists’ anti-foreign direct investment (FDI) policies.
This article seeks to explain why financial services firms face high levels of political risk and how they can mitigate it. To do that, the article analyzes the ambiguous policies of ECE national populists towards foreign investors and identifies sectoral and country-level factors that explain variation in political risk that foreign companies face. It also discusses which political strategies firms in the region have adopted to mitigate political risk work and which ones do not, particularly in the financial services industry.
Corporate tax planning: a productivity lever in a low-growth era
Spyridon Gkikopoulos | Alliance Manchester Business School, The University of Manchester
Konstantinos Stathopoulos | Alliance Manchester Business School, The University of Manchester
Persistently sluggish productivity growth has become a defining challenge for advanced economies, threatening long-term prosperity. In this article, we explore corporate tax planning as an underappreciated lever to boost firm-level productivity amid these headwinds.
Drawing on recent research, we find that firms that actively manage their tax affairs – thereby optimizing their
effective tax rates – achieve measurably higher productivity. The gains are especially pronounced for businesses facing financial constraints or investing heavily in knowledge and innovation, which depend on internal funding. Our analysis highlights that increased after-tax cash flows from tax planning fuel growth in capital expenditures, hiring, and R&D, translating into more output per unit of input.
Crucially, we identify banking relationships as a conduit for effective tax planning: firms that partner with tax-savvy banks see significant productivity bumps relative to peers. These findings carry important implications for corporate leaders, banks, and policymakers. With careful design and execution, tax planning can serve as a strategic tool to alleviate financial frictions in capital markets and spark productivity growth – a much-needed tailwind in an era of economic stagnation.
In what follows, we outline the conceptual framework linking tax planning to productivity, examine the mechanisms at work, discuss the facilitating role of banks and offer actionable insights for practitioners and regulators.
Konstantinos Stathopoulos | Alliance Manchester Business School, The University of Manchester
Persistently sluggish productivity growth has become a defining challenge for advanced economies, threatening long-term prosperity. In this article, we explore corporate tax planning as an underappreciated lever to boost firm-level productivity amid these headwinds.
Drawing on recent research, we find that firms that actively manage their tax affairs – thereby optimizing their
effective tax rates – achieve measurably higher productivity. The gains are especially pronounced for businesses facing financial constraints or investing heavily in knowledge and innovation, which depend on internal funding. Our analysis highlights that increased after-tax cash flows from tax planning fuel growth in capital expenditures, hiring, and R&D, translating into more output per unit of input.
Crucially, we identify banking relationships as a conduit for effective tax planning: firms that partner with tax-savvy banks see significant productivity bumps relative to peers. These findings carry important implications for corporate leaders, banks, and policymakers. With careful design and execution, tax planning can serve as a strategic tool to alleviate financial frictions in capital markets and spark productivity growth – a much-needed tailwind in an era of economic stagnation.
In what follows, we outline the conceptual framework linking tax planning to productivity, examine the mechanisms at work, discuss the facilitating role of banks and offer actionable insights for practitioners and regulators.
When growth isn’t enough: how uncertainty reshapes hiring decisions
Duc Duy Nguyen | Professor in Finance, Durham University
Vathunyoo Sila | Professor and Chair of Finance, University of Edinburgh
Hiring has slowed across many advanced economies despite continued economic growth. This article examines how political uncertainty reshapes firms’ hiring decisions, using evidence from more than 10 million U.S. job postings around state governor elections.
We show that uncertainty affects not only the volume of hiring but also the composition of roles firms choose to fill. Firms disproportionately scale back specialized, high-commitment positions, shift towards more flexible
and temporary roles and relax job requirements to preserve adaptability. These adjustments reflect the partially irreversible nature of hiring and the value of waiting when future regulatory and policy conditions are difficult to predict.
Worker behavior reinforces these patterns: job-to-job mobility declines under uncertainty, while matches formed during uncertain periods are less stable. Together, these dynamics help explain why labor markets can cool even when output remains resilient.
The findings are particularly relevant for financial services firms operating in highly regulated environments, where hiring mistakes are costly to reverse. Rather than signaling weak fundamentals, slower hiring often reflects a strategic response to uncertainty, with implications for workforce planning, internal mobility and talent risk management.
Vathunyoo Sila | Professor and Chair of Finance, University of Edinburgh
Hiring has slowed across many advanced economies despite continued economic growth. This article examines how political uncertainty reshapes firms’ hiring decisions, using evidence from more than 10 million U.S. job postings around state governor elections.
We show that uncertainty affects not only the volume of hiring but also the composition of roles firms choose to fill. Firms disproportionately scale back specialized, high-commitment positions, shift towards more flexible
and temporary roles and relax job requirements to preserve adaptability. These adjustments reflect the partially irreversible nature of hiring and the value of waiting when future regulatory and policy conditions are difficult to predict.
Worker behavior reinforces these patterns: job-to-job mobility declines under uncertainty, while matches formed during uncertain periods are less stable. Together, these dynamics help explain why labor markets can cool even when output remains resilient.
The findings are particularly relevant for financial services firms operating in highly regulated environments, where hiring mistakes are costly to reverse. Rather than signaling weak fundamentals, slower hiring often reflects a strategic response to uncertainty, with implications for workforce planning, internal mobility and talent risk management.
Private equity’s retail turn: anatomy of a misselling risk
Ludovic Phalippou | Professor of Financial Economics, University of Oxford, Said Business School
Private equity’s retail expansion has been promoted as ‘democratization,’ yet it primarily transfers the complexity and opacity of institutional structures to individual investors. Semi-liquid vehicles now marketed to the public rely on discretionary valuations, layered fees and misleading performance metrics.
These features, once tolerated among institutions, are now creating predictable legal and economic risks. The likely outcome is a wave of litigation that will expose hidden practices and force greater transparency. This process will make private equity cleaner, fairer, and ultimately more sustainable, but only after the reckoning has begun.
Private equity’s retail expansion has been promoted as ‘democratization,’ yet it primarily transfers the complexity and opacity of institutional structures to individual investors. Semi-liquid vehicles now marketed to the public rely on discretionary valuations, layered fees and misleading performance metrics.
These features, once tolerated among institutions, are now creating predictable legal and economic risks. The likely outcome is a wave of litigation that will expose hidden practices and force greater transparency. This process will make private equity cleaner, fairer, and ultimately more sustainable, but only after the reckoning has begun.
Venture capital investment and the return of geopolitics
Alex Preda | Professor of Sociology, Lingnan University
David Xingyi Chen | Research Officer, Lingnan University
We set out two major ways states and geopolitics intervene in venture capital (VC) operations. First, states and geopolitics constitute uncertainties and risks that VCs need to account for, on the capital that VCs attract and deploy, and the technologies that VCs invest in. Second, governments participate in the private capital markets by providing VCs with funds, collaborating with VCs and purchasing startup services.
We observed changes in how these two avenues influence VC operations. Geopolitics are increasingly pertinent, resulting in a situation of heightened risks and uncertainties, impacting access to markets and potential returns. Governments behave more strategically in select vectors and retrench in others, resulting in a corresponding reorientation of VC strategies.
These developments go against the understanding of the retreat of the state, where private capital increasingly becomes the go-to medium for funding technological innovation. Instead, the states are becoming more hands-on, acting according to geopolitical competitions and their strategic priorities. We call for this development to be recognized by academics and practitioners and offer practical suggestions.
David Xingyi Chen | Research Officer, Lingnan University
We set out two major ways states and geopolitics intervene in venture capital (VC) operations. First, states and geopolitics constitute uncertainties and risks that VCs need to account for, on the capital that VCs attract and deploy, and the technologies that VCs invest in. Second, governments participate in the private capital markets by providing VCs with funds, collaborating with VCs and purchasing startup services.
We observed changes in how these two avenues influence VC operations. Geopolitics are increasingly pertinent, resulting in a situation of heightened risks and uncertainties, impacting access to markets and potential returns. Governments behave more strategically in select vectors and retrench in others, resulting in a corresponding reorientation of VC strategies.
These developments go against the understanding of the retreat of the state, where private capital increasingly becomes the go-to medium for funding technological innovation. Instead, the states are becoming more hands-on, acting according to geopolitical competitions and their strategic priorities. We call for this development to be recognized by academics and practitioners and offer practical suggestions.