Article

Geopolitics is changing how businesses manage risk

Geopolitical risk is now a board-level issue. Discover how integrated risk management helps businesses build resilience amid global uncertainty.

Geopolitical risk describes the threat, emergence, and escalation of harmful developments tied to war, terrorism, and tensions among states and political actors that can undermine stable international relations.

Recent events show how quickly geopolitical developments can translate into operational and financial consequences. In August 2026, a drone laden with military-grade explosives struck a NATO logistics aircraft on the tarmac at Germany’s Leipzig/Halle Airport — one of Europe’s largest cargo hubs. The strike triggered a full runway closure diversion of multiple flights, illustrating how what is likely an example of state-linked sabotage can now reach directly into commercial aviation and freight infrastructure.

This event and others show that geopolitical risk is no longer an isolated concern confined to a limited number of often remote conflict zones. Instead, it has become a board-level issue for organisations globally, shaping how senior leaders think about resilience, investment, continuity, and growth.

Political risk now extends well beyond conventional conflict

For many years, political risk was primarily associated with war, expropriation, and direct government intervention. As such, it was typically confined to the specific geographic locations where such events occurred. Those traditional manifestations of geopolitics remain important but no longer capture the full picture.

Today, geopolitical tension increasingly creates commercial disruption without taking the form of conventional warfare. A wider array of geopolitical threats, including state-backed cyberattacks, disinformation campaigns, sabotage, trade and sanctions pressure, and interference with logistics or communications, is generating losses today.

Additionally, manifestations of geopolitical risk have become more common and more complex. Geopolitical risk is becoming as much about interconnectedness as geography.

A policy shift can alter trade flows overnight. A state-backed cyber incident can disrupt critical infrastructure. An election can reshape tax policy, market access, or foreign investment. Civil unrest can close transport routes, constrain site access, and heighten duty-of-care concerns without ever escalating into outright conflict.

As such, organisations need to move towards a more integrated view of exposure: one that links horizon scanning, contingency planning, and risk transfer within a coherent framework.

Disruption can quickly become a business impact

Since 2025, tariffs have become a feature of the operating environment, generating disruption that quickly translates into business impact. What began as a set of US actions has since evolved into a shifting, multi-layered regime that has been amended, litigated, and retaliated against roughly every few weeks. Most recently, tensions have surfaced in US-Canada relations and Mexico-China relations. For businesses, the practical effect has been sustained uncertainty in trade compliance and landed costs, sourcing decisions, and contract terms.

Meanwhile, pressure on the world’s key maritime chokepoints has continued to intensify. UNCTAD’s early-2024 warning about simultaneous disruption to the Suez and Panama canals proved to be an early signal of a deepening pattern. By early 2026, escalation in the Strait of Hormuz had further complicated the picture, as daily transits collapsed to single figures, with dramatic implications for global markets, including energy and fertilisers.

Civil unrest is a persistent operating risk

Political instability need not escalate into armed conflict to become commercially significant. Riots, strikes, protests, and civil commotion can damage property, interrupt trading, restrict access to sites, disrupt logistics, and create employee safety concerns. This is true even in markets not usually seen as conflict environments, such as Chile in 2019.

Often driven by inflation, inequality, elections, or dissatisfaction with government, these events are not isolated local issues. According to one estimate, there were more than 80,000 protest incidents across the 20 countries with the highest protest frequency in 2024. For multinational organisations, the risk lies in the cumulative effect of disruptions across territories. Civil unrest should be viewed as part of the wider geopolitical risk landscape, with implications for continuity, access, supply chains, and duty of care.

Elections and intervention remain material risks

Elections now carry greater commercial significance, since political transitions can rapidly alter market conditions. In a period of geoeconomic confrontation, sanctions, tariffs, and trade policy are increasingly used as tools of statecraft.

Alongside these newer pressures, more traditional political risks still matter. Policy development and government regulatory actions can make it harder for businesses to move money, operate assets, or rely on existing agreements. Such actions may include changes to capital controls, licensing requirements, contract enforceability, foreign investment rules, trade restrictions, and regulatory expectations, and they may emerge gradually rather than through a single dramatic event. The key issue is not simply whether a market feels politically uncertain, but how specific developments such as these could affect day-to-day operations, financial flexibility, and the viability of an investment or project.

The most effective responses are integrated, not isolated

Taking a holistic approach to geopolitical risk management

As exposures broaden, the political risk insurance (PRI) market is adapting in both scope and application. New products, regional expansion, and more specialised underwriting approaches are emerging in response to a more fragmented and commercially complex risk environment. There is growing demand for cover linked to cross-border trade, investment, and project finance to service client PRI demands, and cover is expanding beyond traditional sovereign and infrastructure exposures into climate and transition-related investments.

These developments suggest that PRI is no longer viewed solely as protection against extreme sovereign or sovereign-driven events. Increasingly, it is being considered as an essential part of a broader resilience strategy, helping organisations manage potential future volatility, creating stability for medium to long-term investment and trading decisions, and attracting capital provision.

How PRI enables companies to act on emerging opportunities

In a more fluid geopolitical environment, where new constraints and new opportunities can emerge quickly, it can give businesses greater confidence to pursue investments, projects, and trading relationships that might previously have seemed too uncertain or difficult to justify. By reducing the perceived risk around cross-border exposure, PRI can help attract capital, strengthen lender and investor confidence, lower borrowing costs, and improve the risk-adjusted return profile of a transaction. It is not simply a defensive tool: it can also enable organisations to act on opportunities created by a changing world that they may otherwise have felt unable to pursue.

How Marsh Risk can help

Risk transfer has always worked best when it sits within a wider risk management and response framework. No single lever is sufficient on its own: horizon scanning can identify where political conditions are shifting, but that insight has limited value unless it informs action. Organisations need clear ownership and visibility of geopolitical risk, regular review of risk registers, and stronger oversight of supply chains and key dependencies. Clear communication channels across functions and with critical third parties are also essential, so that emerging issues are identified early, and responsibilities are understood before disruption occurs.

That governance foundation needs to be supported by assessment and planning. Organisations should test how they would respond through exercises and simulations, stress-test current controls against plausible disruption scenarios, and address any gaps that those reviews expose. Just as importantly, they need clear escalation and communication mechanisms so that decisions can be made quickly under pressure.

Rather than treating insurance as a standalone solution, organisations should use it as a tool alongside broader risk management and response measures. All these elements are necessary for effective geopolitical risk management: together, they provide financial protection, help reduce disruption, support faster decisions, and strengthen resilience when events unfold.

To discuss how Marsh Risk Consulting can support your organisation’s risk management and planning needs, please contact your Marsh advisor.

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Report

Geopolitics is changing how businesses manage risk

Political risk now extends well beyond conventional conflict

Disruption can quickly become a business impact

Civil unrest is a persistent operating risk

Elections and intervention remain material risks

The most effective responses are integrated, not isolated

Taking a holistic approach to geopolitical risk management

How PRI enables companies to act on emerging opportunities

How Marsh Risk can help

Our people

Ed Woolcock

Christopher Coppock

Maija Adams

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