Geopolitical Risk

Understanding geopolitical risks in today's global landscape

Geopolitical events are a dominant force that is shaping the global risk landscape.

In the world of geopolitical risk, the Russia-Ukraine war took center stage in 2023; the Middle East in 2024. Today, trade and tariffs dominate the headlines.

Our 2025 Political Risk Survey found that 58% of respondents expect trade wars to have a negative financial impact on their organization in 2025. That is about the same percentage of those who said the Russia-Ukraine war had negatively affected their business in 2023. In 2024, almost 40% of our survey respondents said they had experienced a negative financial impact from the conflict in the Middle East — in most cases, due to supply-chain disruptions.

Geopolitical risks are notoriously difficult to predict. Conflicts often arise with little warning and regional skirmishes can have far-reaching effects on international political stability, markets and supply chains. We continually monitor the complexities of geopolitical risks to help you understand the connections between global events and their possible effects on your organization.

Trade returns as a top geopolitical risk

In 2021, the United States appeared on our annual top 10 list of countries where companies experienced political risk losses. At the time, U.S. export controls imposed against China (which negatively impacted U.S. microchip manufacturers) and U.S. secondary sanctions imposed on Iran (mostly affecting European and Asian companies with investments in or trading relationships with Iran) drove the losses.

In 2025, uncertainty about U.S. trade policy has made the inability to plan a primary business challenge among boards of directors and senior leaders worldwide.

The far-reaching effects of regional conflicts

While trade takes center stage, the conflicts in Ukraine and the Middle East are still significant geopolitical crises with implications felt globally.

Both wars have led to tragic loss of life and displacement. They have also caused substantial disruptions in global supply chains and financial markets.

The Russia-Ukraine war has led to supply chain issues caused by the lack of agricultural goods and manufactured items from the region. The war has also complicated air travel in the area.

Likewise, Israel’s 12-day war with Iran in 2025 forced the closure of wide swaths of airspace throughout the Middle East as the two nations exchanged missiles and drone fire over their neighbors’ airspace.

Meanwhile, the Israel-Hamas war has led to unforeseen consequences beyond the fighting. For example, Houthi terrorists in Yemen have curtailed shipping in the Red Sea in support of Hamas, impacting shipping and disrupting supply chains.

These crises have also increased the risk of cyberattacks and financial-market volatility, prompting organizations to reassess their cybersecurity measures and financial strategies.

Understanding the multifaceted nature of these and future conflicts is crucial for businesses to mitigate geopolitical risk.

Future geopolitical risks

It's hard to predict the next hot spot for conflict or crisis. There are perennially volatile areas such as India and Pakistan and the Middle East.

In east Asia, there are several examples of potential conflicts that could significantly affect global trade, including China invading Taiwan and North Korea attacking South Korea. Both could severely impact the global economy and even lead to wider conflicts across the globe. But there are also less kinetic conflicts in the region, including the multi-nation dispute over the South China Sea and border disputes between Cambodia and Thailand.

Those aren’t the only hot spots across the globe that could destabilize global trade. Both our 2025 Political Risk Index and our 2025 Political Risk Survey highlight several scenarios and examples of geopolitical risks, including:

• Political polarization in domestic politics
• Ukraine escalation and complications
• U.S.-China rivalry
• Uncertain climate policies
• Middle East escalation
• Institutional decay of liberal democracy in the West
• Gray-zone action and aggression

Broader implications of geopolitical risks

Geopolitical risks extend beyond the immediate effects of conflicts, as illustrated by the Houthi attacks in the Red Sea. They encompass a range of issues that can destabilize regions and impact global operations, including:

• Political changes and volatility: Shifts in political power can lead to unpredictability in previously stable regions, affecting international business operations and investments
• Economic policies and sanctions: Economic decisions and sanctions can disrupt trade and investment flows, posing challenges to global supply chains and financial markets
• Cyber threats and security: Geopolitical conflicts often extend into cyberspace, where cyber warfare and espionage present serious risks to national and corporate security while artificial intelligence and quantum computing can accentuate cyber threats
• Environmental and health risks: Geopolitical decisions can also influence environmental policies and responses to global health challenges, affecting public and environmental health across borders

Managing geopolitical risks

To navigate the complexities of geopolitical risks, organizations must adopt comprehensive risk management strategies such as:

• Risk assessment and monitoring: Continuously monitor geopolitical developments and assess the potential impact, and additional effects, on business operations and markets
• Diversification: Diversify supply chains and markets to reduce dependence on volatile regions
• Crisis management: Develop robust crisis management plans to respond effectively to immediate threats, such as political unrest, terrorism and war
• Strategic planning: Incorporate geopolitical risk planning into strategic decision making, ensuring that potential risks are understood and mitigated

Geopolitical risks require vigilant monitoring and proactive management. By understanding the broad spectrum of risks and implementing integrated strategies, you can protect your organization against the uncertainties of the global political and economic environment. The ongoing conflicts in Ukraine and the Middle East serve as critical reminders of the need for preparedness and adaptability in the face of geopolitical upheavals.

Our geopolitical risk expertise

WTW’s global team, which includes specialists in political risk analytics, crisis management, risk engineering and broking, has the knowledge and analytical tools to help you understand emerging global trends.

Our team offers a comprehensive range of consulting, risk transfer and crisis management services to help you mitigate your risks and minimize your exposures.