Geopolitical risk spikes – report

The events of 2022 have spurred a spike in geopolitical risks and a dramatic drop in businesses’ resilience to those risks, according to new research from specialist insurer Beazley. The impact of inflation is also causing deep concerns about domestic stability, alongside worries that global tensions are increasing threats from external sources. As businesses adjust to the current situation, preparedness and mitigation strategies are becoming a key focus.

Beazley’s new report, Spotlight on Geopolitical Risks, found that across the UK and US, few business leaders feel able to manage current geopolitical risks. Concerns about the possible consequences of war are rising compared to last year, and inflation is a dominant concern.

Among the report’s findings are:

• Businesses urgently need to build resilience, as they currently face a high-risk/low-resilience geopolitical environment.
• Inflation is a dominant threat, with 55% of business leaders saying they lack the necessary resilience to deal with it. That figure rises to 65% in the US.
• The proportion of business leaders ranking war and terror as their top risk has spiked 46% over the previous year.
• Economic uncertainty has spiked 31% from the previous year.
• Risking prices and an unpredictable economic environment are driving instability and civil unrest, as has already been seen in Sri Lanka. Countries such as Egypt and Turkey could be vulnerable as well.
• US business must deal with both unpredictability domestically due to rising gun violence, and a watershed in geopolitics as the country’s relationship with Russia and China shifts.
• Business leaders need to better understand their geopolitical risks and seek to mitigate them where possible. Specialist political risk, trade credit and terrorism insurers can play a role in providing appropriate cover.

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“Against a challenging backdrop, business strategies are now at a point of inflection,” said Roddy Barnett, head of political risks and trade credit at Beazley. “Even those territories far removed from the theater of war in Eastern Europe are feeling the impact of global sanctions and commodity shortages on risks across the board, from supply chain to cyber to political risk and trade credit. Businesses need to know that as we face a moment of geopolitical change, which is fraught with unpredictability, they can protect overseas physical assets and their human capital both at home and abroad by actively investing in a mixture of risk management and effective insurance cover.”