As the world order is shifting and democracies are eroding in the third decade of the new millennium, geopolitical risks are increasing and impacting investment decisions. Michelle DiGruttolo, principal and founder of a geopolitical consulting firm, has developed a new framework—the Political, Economic, Social, Technological, Legal, Environmental, and Security (PESTLES) model—to address geopolitical risks and investment decisions.

In this partially fictionalized, field-based case, a hedge fund company is debating whether to invest in United States–based Intel Corporation (Intel) or the Taiwan Manufacturing Semiconductor Company (TSMC). TSMC is by far the market leader, while Intel has lost its technological edge. Yet, TSMC mainly operates in Taiwan, which China wants to take control of, leading to a great deal of uncertainty. DiGruttolo has completed a PESTLES analysis comparing the two companies.

Students are provided background on geopolitical risks in general; the semiconductor industry; Intel and TSMC; and the tensions between the United States, a strong ally of Taiwan, and the Chinese government. Students consider DiGruttolo’s PESTLES assessment and debate the merits of investing in Intel or TSMC.

The case is taught in “Financial Institutions and Markets,” a second-year MBA elective at the University of Virginia Darden School of Business. The course is important for students pursuing careers in investment banking, private equity, hedge funds, asset management, corporate finance, and financial services. This case can also be taught in other finance courses covering investments and risks, as well as those on government and policy, international relations, and trade.