The Taiwan Contingency Is Not a Black Swan — It Is a Planning Variable
Boards keep treating a Taiwan scenario as an unthinkable tail risk. I treat it as a planning variable — one that should be stress-tested, quantified, and built into capital allocation decisions today. Here is the framework I use.
Why I stopped calling it a "black swan"
I have been in enough boardrooms to know the pattern. Someone raises the Taiwan scenario. Everyone nods. Someone says it is unlikely. Everyone agrees. The conversation moves on. Nothing changes. I stopped accepting that framing years ago. A black swan is an unpredictable, unpreventable event. A Taiwan contingency is neither — it is a well-analyzed, extensively wargamed scenario with clear signaling pathways, and its probability, while not certain, is high enough that any board with material China exposure should be planning for it. When I work with boards, I reframe it immediately: this is not a black swan, it is a planning variable. You do not need to assign a probability. You need to identify which of your current commitments would be irreversible and most costly under the scenario, and then decide whether to act now or accept the exposure.
What a Taiwan scenario actually looks like for business
Let me be concrete about what I tell clients to expect, because the abstraction is what paralyzes boards. A Taiwan blockade or military conflict would likely trigger comprehensive U.S. sanctions on China — comparable in scope to the Russia sanctions package, but applied to an economy ten times larger. TSMC production disruption would cascade through global electronics within weeks. Chinese counter-sanctions would hit U.S. companies operating in China. Transpacific shipping and financial flows would be severely disrupted. For most companies, the question is not whether they would be affected — it is how fast, how deeply, and whether any of the damage is reversible. I walk boards through each of these channels against their specific exposure map. The exercise is uncomfortable. It is also the most valuable hour many of them spend all year.
The decisions that cannot wait
Here is the insight that changes how boards approach this: some decisions can be made after a crisis begins, and some cannot. You can adjust inventory levels after a signal emerges. You cannot rebuild a supply chain, restructure a joint venture, or exit a Chinese investment in the middle of a sanctions cascade — those decisions take months or years, and by the time the crisis hits, the window has closed. I help boards separate their exposure into two buckets: reversible and irreversible. The irreversible bucket is where the planning work matters most. If your joint venture with a Chinese partner cannot be unwound quickly, that is an irreversible commitment. If your manufacturing is physically located in a zone that would be subject to sanctions, that is an irreversible commitment. The question for the board is not whether to eliminate these — some are worth keeping — but whether the decision to retain them is deliberate and informed, or simply the result of never having asked.
What I tell boards to actually do
Three concrete steps. First, build the exposure map I described — regulatory, commercial, financial, operational — and quantify each dimension. Second, run the Taiwan scenario against it and identify which commitments are irreversible. Third, for each irreversible commitment, make a deliberate decision: retain, hedge, or begin exiting now. That third step is where most boards stall, because it requires making a call. But that is what governance is — making calls with incomplete information. I would rather a board make a deliberate decision to accept Taiwan exposure than sleepwalk into it because no one wanted to have the uncomfortable conversation.
Frequently Asked Questions
Does planning for a Taiwan contingency mean I should exit China entirely?
No. It means making a deliberate, informed decision about each exposure. Some you will choose to retain because the commercial case outweighs the risk. Others you will hedge or exit. The point is that the decision is conscious, not accidental.
How do I quantify something this uncertain?
You do not need a precise probability. You need to identify which commitments are irreversible under the scenario and what they would cost. That is a scenario analysis, not a forecast — and it is far more useful for board decision-making than a single number.
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Brian B. Su works directly with decision-makers.