Geopolitical Dynamics and Supply Chain Vulnerabilities
In a recent report, Marsh, a leading insurance broker, underscores the escalating risk of acute supply chain disruptions by 2025, driven by intensifying geopolitical tensions and protectionist trade policies. The Political Risk Report 2025 highlights pivotal political and economic trends that are poised to impact multinational businesses and investors in the forthcoming year.
Trade Controls and Connector Countries
Organisations engaging in trade with connector nations like Vietnam, Mexico, South Korea, and Hungary to circumvent existing or anticipated trade restrictions, or those with suppliers engaging in such practices, could experience heightened trade policy-induced disruptions. As relationships between major trading entities sour, governments may impose trade barriers on goods originating from connector nations, particularly those containing components from the initially targeted countries, exacerbating global supply chain instability.
Resilience in the Face of Geopolitical Shifts
The report advises organisations to bolster their resilience against supply chain shocks influenced by geopolitical developments by scrutinizing China’s trade strategy commitments and the US’s underlying trade policy objectives. Additionally, businesses should evaluate the sustainability of the current connector model in relation to their operational strategies.
Energy Transition and Regulatory Challenges
The report also highlights the duality of challenges and opportunities presented by shifting market and political dynamics, particularly in the context of energy transition. Echoing the World Economic Forum’s Global Risks Report 2025, it forecasts that environmental risks will dominate the next decade. Despite significant progress by global Climate Change Mitigators (CCMs) at COP29 and the momentum gained by Dedicated Financial Networks (DFNs), challenges persist, especially concerning political risks and the potential for non-fulfilment. Moreover, the increased climate compliance requirements, especially under new European Union regulations, might pose operational risks for organisations.
Navigating an Unprecedented Operating Environment
Robert Perry, Global Political Risks and Structured Credit Leader at Marsh Specialty, remarked, “The heightened risks surrounding the economy, geopolitics, and climate change are creating an increasingly complex operating environment, unlike any that organisations have navigated in decades. Those who build on their capability to understand, assess, and mitigate risks impacting their operations are likely to be better positioned to seize opportunities where others perceive uncertainty, thus gaining a competitive advantage in these turbulent times.”
