Are we wisely waiting or merely drifting? That’s a question many corporate leaders will be asking themselves in the coming weeks and months. Uncertainty is not a new concept. But today’s political uncertainty — epitomized by the U.S. tariff edicts and global responses to them, ranging from threats to negotiation — seems to be having a distinct, paralyzing effect. Companies are deferring investments, such as chemical giant Dow with its now delayed construction of a new plant. Companies are also postponing sales; for example, Nintendo pushed back preorders of its next console. Finally, companies are delaying decisions: Bookings for shipping containers and airfreight have fallen significantly from a year ago. The secretary general of the International Chamber of Commerce has said that this behavior is evidence that companies are “kicking decisions down the road” on supply chain restructuring as they watch how trade policies and relations develop.

Wait and see can be a dysfunctional response to change or uncertainty if it leads to missed opportunities or an increase in the eventual cost or risks related to actions. However, wait and see can also be a smart strategy for delaying commitments while observing an evolving situation.

When should a wait-and-see strategy be deployed, and how can it be executed effectively? Let’s explore the key issues for corporate leaders.

When to Wait and See

In reality, wait-and-see strategies are used successfully well beyond the corporate realm. Their viability hinges on two conditions: First, wait and see can be successful only if uncertainty is elevated temporarily. For example, when confronted with a period of unpredictable food supply, some bats and mice enter a state of torpor, conserving energy by reducing motion and body temperature. Crucially, this state is short term and can be reversed quickly when uncertainty abates. If food supply uncertainty is expected over the longer term, short-term energy conservation is not sufficient, and animals instead enter hibernation.

Second, wait and see is especially reasonable when the context is reflexive — that is, actions taken may spark reactions that further increase uncertainty or even increase the probability of a negative outcome. For example, in military strategy, a wait-and-see approach has been used successfully when the alternative — active engagement — would likely have led to an undesired escalation. A prime example is the Cuban missile crisis, in which the U.S. Navy chose to create a blockade around the island and observe the Soviets’ next steps rather than mount a full-scale invasion, given the possible nuclear escalation risk.

While we are not on the brink of nuclear war, the current environment of political uncertainty does satisfy these special conditions. For one, the uncertainty businesses face is deliberate — driven by political choices. As a result, it is reasonable to believe that the current elevated uncertainty is temporary, assuming that the current administration or future ones will eventually settle on a more stable or predictable policy direction.

Also, many of the recently enacted policies are reversible: They could be undone by either the next administration or — as we have observed in several cases already — the current one. In this context, delaying business decisions until new information comes to light may be sensible. Conversely, new, hard-to-unwind commitments should be avoided.

Moreover, the past decade has shown that when businesses engage with political issues, there are significant risks of escalation. A recent example of this is the White House’s prompt, critical response to Amazon reportedly planning to display higher tariffs’ price impact on some of the products sold on its website. But this phenomenon is not isolated to the current administration or, indeed, to government in general: During the past decade, many companies have faced significant backlash from the public, the press, and their own employees over their stance-taking on social issues.

In short, in an environment characterized by political uncertainty — which is temporary and in which actions may lead to backlash — adopting a wait-and-see approach may be advantageous. This approach enables businesses to steer clear of hard-to-reverse commitments in a shifting context and to avoid decisions or announcements that may lead to political or public backlash.

When Waiting Isn’t Enough

Political uncertainty does not play out uniformly for all companies. How a company deals with it will depend on whether it has access to unique policy insights, whether its business faces an existential threat, or whether it finds itself in a period of protracted uncertainty.

Some businesses may possess unique policy insights or be able to exert influence on policy makers such that they can achieve greater certainty. As a result, they have an opportunity to seize the initiative — and potentially capture an asymmetric upside. One example of this is Pfizer’s development of a COVID-19 vaccine in record time. It was able to do so by working with regulators to establish a simplified and accelerated approval process in which it initially filed incomplete drug-testing plans and completed them as data became available.

For other businesses, political uncertainty may create existential threats. For example, many U.S. companies with supply chains concentrated in China have voiced concerns that the sharp spike in U.S. tariffs on China meant that their business models were no longer viable: MGA Entertainment, the largest U.S. toymaker, predicted that the 145% import duties would cause its sales to drop by 30% to 40% this year as a result of its having to nearly double prices. While the recent agreement to lower U.S.-China tariffs has alleviated pressure on importers for the time being, leaders should not count on such reversals: In 2018, a set of tariff escalations between the U.S. and China caused a 75% drop in U.S. soybean imports by China, dealing a major blow to American producers — and demonstrating how significant the impact of tariffs can be. Thus, leaders facing an existential threat must act swiftly to ensure the survival of their business by freeing up resources. This may mean freezing discretionary spending and canceling projects, or even divesting or winding down businesses.

Finally, businesses may face a protracted period of regularly occurring surprises, each of which has the potential to alter the path to future success. When elevated uncertainty endures and creates a multitude of plausible futures, passively waiting can become dysfunctional. In such a context, companies need to create options that may pay off in many different future states of the world. As an example, consider the situation automakers currently face, with constantly evolving U.S. trade tensions with China and Mexico, and the revocation of U.S. federal electric vehicle targets and charging infrastructure — which state governments or future administrations may yet reinstate.

In this “many futures” environment, maximum optionality could be achieved by, for example, creating fully modular car platforms that could accommodate many designs and be assembled anywhere on the globe. Coupled with subscription or swap services that let consumers switch between cars as local incentives change, this type of strategy would allow for greater business flexibility. However, creating options does not have to be so disruptive; a company may also make a smaller side bet on a potential future. As a case in point, consider Nvidia setting up its GeForce Now service — which offers gamers on-demand access to its graphics cards — as an option in anticipation of a future in which selling hardware to consumers is no longer the norm. The Nvidia example aside, such options are often incompatible with a company’s current business model and are essentially hedges against multiple plausible futures.