GERMANY Trends and Developments Contributed by: Stephan Waldhausen, Moritz Pellmann, Justus Anacker and Cristina Hajek Gross, Freshfields PartG mbB
Boards must actively oversee energy needs, supplier dependencies and exposure to further supply disrup - tions or price shocks. Developing concrete back-up strategies, such as diversifying energy sources, secur - ing long-term supply agreements and preparing for emergency scenarios, forms an integral part of the board’s duty of care. At the same time, current conflicts are accelerating a broader trend towards the instrumentalisation of reg - ulation for geopolitical purposes. For globally active companies, this creates a structural tension: the obli - gation to comply with all applicable laws becomes increasingly difficult where regulatory regimes across jurisdictions not only diverge but directly contradict one another. Where such normative conflicts arise, boards can - not assume that domestic law will automatically prevail. Courts have begun to adopt a more prag - matic approach, increasingly requiring companies to exhaust available mechanisms to resolve regulatory conflicts before determining, on the basis of a care - fully documented assessment, which obligations to prioritise. In this context, effective navigation requires companies to closely integrate public affairs, stake - holder engagement and strategic risk management into their compliance frameworks. In this volatile and high-stakes geopolitical environ - ment, boards must treat geopolitical risk mitigation as a proactive strategic discipline rather than a reactive compliance exercise. Key measures include: • diversifying supply chains; • strategically reviewing and adapting international contracts; • conducting structured scenario planning and “What if?” analyses, including political and security related scenarios; • developing contingency and exit strategies; and • enhancing reporting on geopolitical risks to meet the expectations of investors, regulators and busi - ness partners. More broadly, boards should aim to make their organi - sations security-resilient by strengthening internal capabilities in areas such as geopolitical analysis,
public affairs, risk management and operational secu - rity, and by ensuring that these functions have direct reporting lines to board level. AI Disruption The integration of AI into corporate operations and decision-making continues to transform how com - panies operate, compete and strategise. While AI creates significant opportunities, it also introduces new uncertainties, challenging business models, disrupting entire sectors and raising complex ethical and legal questions. The core principles for AI gov - ernance outlined last year – legality, careful decision making, non-delegable responsibility, human supervi - sion, technical competence and appropriate organisa - tional safeguards – continue to form the baseline that boards must uphold. Within the span of a single year, however, the practi - cal landscape has shifted markedly. The central ques - tion is no longer whether or in what form AI should be adopted. Instead, boards must determine how to embed specialised AI solutions, how to implement safeguards and redundancies for critical AI systems, how to govern increasingly autonomous AI agents, and how extensively AI should be integrated into the board’s own work. All of this must be achieved against the backdrop of a regulatory environment that remains in rapid flux. Productivity effects and workforce implications Empirical evidence suggests that AI adoption can deliver measurable productivity gains. A study of over 12,000 European firms found that AI adoption increases labour productivity by 4% on average, with no evidence of reduced employment in the short run. The effects are, however, contingent on complemen - tary investments in AI expertise: according to a 2026 CEPR discussion paper based on firm-level data collected by the European Investment Bank, each additional percentage point invested in workforce training amplifies AI’s productivity effect by 5.9% (CEPR Discussion Paper No. 21082, Aldasoro et al., AI Adoption, Productivity and Employment: Evidence from European Firms). AI implementation, therefore, should be accompanied by adequate investment in human capital. As a result, the Chief Human Resourc - es Officer (CHRO) is becoming increasingly strategic,
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