Geopolitical Storm Warning: Five Risks Banks Should Watch

From the largest multinational institutions to the smallest community banks, no financial institution is immune to the growing threat of geopolitical risks. As the world becomes increasingly interconnected and volatile, the potential for disruptions and losses is greater than ever. 

The RMA Journal recently reached out to experts at the global risk consultancy Control Risks, who shared their five biggest geopolitical threats banks should be watching over the next year—and how your bank can weather the storm: 

Cyber Espionage and Disruption 

As tensions rise between the United States and China, U.S. banks face a growing threat from state-sponsored cyberattacks. Historically, these state actors focused on surveillance and information gathering, but deteriorating relations have prompted a shift toward more disruptive cyber activities targeting the financial sector, increasing operational risk and leading to potential financial losses. Banks should focus on proactive cybersecurity measures, particularly addressing human error, to mitigate these risks. “The focus should be very much on training, as opposed to just looking at technical solutions,” said Barnaby Fletcher, who leads the risk analysis practice in the U.S. and Canada at Control Risks. 

Middle East Instability 

The Middle East, a region rich with opportunities, also poses significant risks. Escalating conflicts could affect investments, particularly in countries like the UAE and Saudi Arabia. “If I was running a bank, I would not be making massive expenditures in the region until 2025, just to make sure that this doesn’t go sideways,” said Roberta Brzezinski, who manages Control Risks’ business intelligence team across the Americas. Banks should adopt a cautious approach, she advised, delaying significant investments and ensuring robust contingency plans are in place to manage potential disruptions. 

South and Southeast Asia Political Volatility 

Political instability in South and Southeast Asia is a major concern for banks, especially given the region’s critical role in global supply chains. Banks should monitor political developments closely and build strategies to support clients facing supply chain disruptions, while avoiding overexposure to any single region. 

Rising Environmental Activism 

Environmental activism is intensifying, with growing risks of disruptive actions targeting banks, particularly those financing fossil fuel projects. Banks should engage proactively with governments on environmental regulations and maintain clear communication about their sustainability efforts to mitigate potential reputational and operational risks. 

Government Interference With Financial Regulators 

Political interference with financial regulators could destabilize the regulatory environment, affecting bank operations. Banks should strengthen their risk management strategies to address potential political and regulatory shifts, Brzezinski emphasized. 

Read the complete article on geopolitical risks.