MonarchGSA's
Introduction to Geopolitical Risk
Why should a growing tech startup in Austin, Texas worry about political tensions in Southeast Asia? Because in today's interconnected economy, a supply chain disruption thousands of miles away can shut down your production line in a matter of weeks.
In today’s world, businesses face a growing array of global uncertainties. Geopolitical risk exposure refers to the threat that international events – such as conflicts, elections, or trade disputes – pose to a company’s operations and strategy. In simple terms, it’s how political developments can hurt (or help) your business.
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In sectors from defense and aerospace to consumer goods, from AI tech to food exports, business leaders are realizing that geopolitical events, even in far-off regions, can quickly ripple through supply chains, markets, and investments. Being aware of your business's geopolitical risk exposure – and planning for it – is now a critical part of building smarter, more resilient operations.
What is geopolitical risk?
Geopolitical risk refers to the potential for negative impacts on investments, businesses, and global stability stemming from political, social, or military conflicts and tensions between nations or political actors.
It’s called “geopolitical” because geography and politics are intertwined – a policy change or conflict in Country A can have consequences across continents. For example, a war in Eastern Europe or the Middle East can raise energy prices and trigger sanctions that hurt companies in North America or Asia.
Trade tensions between major powers might reorder supply chains and market access, impacting industries from semiconductors to retail goods. In short, geopolitical risk exposure is the collection of worldwide conflicts, power struggles, and policy shifts that can affect a company’s performance.
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Crucially, these geopolitical threats come in many forms. Obvious examples include war, terrorism, and international disputes. But subtler forces – like shifting regulations, sanctions, or even disinformation campaigns – also count.
They don’t even have to be global in scale to matter: a local political crisis or a regional trade ban can be enough to interrupt production, raise costs, or shut off a key market for a business. Some risks build up slowly (giving companies time to adapt), while others erupt overnight and catch everyone by surprise.
Either way, geopolitical events can quickly move markets and upend business plans.
Common challenges in companies
evaluations of their risk exposure
Despite the increasing awareness of geopolitical risk, businesses frequently overlook key factors when planning for these uncertainties. Here are some common blind spots and pitfalls that can leave an organization vulnerable:
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“It Won’t Happen to Us” – Many companies underestimate risks that originate far from their headquarters. It’s a blind spot to assume that a war or crisis in a distant country won’t impact your operations. In reality, global events can quickly challenge even local business strategies. No matter your industry, it’s dangerous to ignore events in “far-off” places, because supply chains and financial systems are globally connected.
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Relying on Past Stability (Temporal Fallacy) – A lot of risk planning is based on extrapolating from recent history. But today this can create an illusion of certainty. Assuming that the next five years will look like the last five is a mistake; transformative events (like pandemics or sudden wars) and massive technological changes (as businesses are experiencing currently) have repeatedly caught businesses off guard. Just because something hasn’t happened before doesn’t mean it can’t happen soon.
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Siloed Awareness – Geopolitical risk is sometimes treated as a concern only for government affairs teams, while the rest of the company stays heads-down. This siloed approach is a major blind spot. In practice, risk awareness needs to be embedded across the organization, not confined to one department. If only your legal team is tracking sanctions, or only your security office is watching instability abroad, you’re likely to miss the full picture. ​​
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Ignoring Early Warning Signals – Often, there are warning signs of geopolitical trouble brewing – but companies may miss them due to complacency or information overload. Paying attention to “weak signals” (minor incidents, political rhetoric, early policy drafts) can give you a head start in preparing. A blind spot for some is not investing in horizon scanning and intelligence gathering. Firms that lack a systematic way to watch these signals often find themselves reacting late. It’s important to have a radar for imminent disruptions and a “sonar” for deeper trends, as the World Economic Forum advises – meaning, dedicate resources to both short-term incident monitoring and long-term trend spotting.
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Underestimating Interconnected Risks – Geopolitical issues rarely occur in isolation. One common blind spot is treating each risk as a single problem, rather than considering how risks can trigger or amplify one another. A trade war might fuel nationalist sentiments in multiple countries, leading to social unrest or cyberattacks. If you plan for each risk in a vacuum, you might miss these cascading effects. A holistic view is needed: consider how, say, a conflict could spur migration that affects labor markets, or how a sanction could spark a political backlash that affects your brand. The global system is highly interconnected, so risk planning must connect the dots.
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How can businesses use geopolitical risk analysis to mitigate risks?
1. Risks: Map your risk ecosystem​​
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Risk visibility starts with honest assessment. Most companies excel at identifying obvious threats—sanctions, conflict zones, regulatory changes—but consistently miss the interconnected vulnerabilities that create cascading failures.
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The critical questions aren't just about direct exposure:
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Which suppliers operate in politically volatile regions?
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Could your investment partners trigger regulatory scrutiny?
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Are you dependent on markets where policy shifts could eliminate access overnight?
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The interconnected global economy means localized disruptions rarely stay localized. A supply chain bottleneck in Southeast Asia becomes a production halt in Ohio. A regulatory change in Brussels reshapes market access across continents.
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2. Risks: Understand and Evaluate
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Effective risk management requires deep comprehension of how different risk types behave and interact. Organizations must move beyond surface-level threat identification to understand the fundamental nature of their risk exposure.
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Risk evaluation involves analyzing multiple dimensions simultaneously:
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Velocity: How quickly can this risk materialize and impact operations?
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Magnitude: What's the potential scale of disruption across business functions?
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Predictability: Are there reliable early warning indicators, or does this risk emerge suddenly?
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Controllability: What degree of influence can your organization exert over the risk's development?
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Interconnectedness: How might this risk trigger or amplify other vulnerabilities?
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Many organizations fail by treating geopolitical risks like operational risks, or regulatory risks like market risks. Each category requires distinct evaluation frameworks and response strategies. Political instability follows different patterns than currency volatility. Sanctions regimes operate under different timelines than supply chain disruptions.
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3. Scenario Plan: Mitigate Risks & Plan Responses
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A critical failure in many organizations is planning to wing it when a crisis hits. The assumption that "we’ll figure it out when it happens" leads to disorganized, slow, and reputation-damaging responses.
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Scenario planning provides both structure and flexibility. It forces leadership to ask:​
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What if this region becomes inaccessible?
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What if a key partner is sanctioned?
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What if regulations tighten overnight?
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The best firms don’t just build contingency binders — they simulate the crisis. They run tabletop drills and assign roles in advance, so that when disruption strikes, the team isn’t having its first meeting during the emergency.
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4. Prioritize & Allocate Resources
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Risk prioritization separates successful organizations from reactive ones. Too many companies allocate resources based on yesterday's problems rather than tomorrow's probabilities, or worse, treat all risks as equally urgent.
The fundamental error is linear thinking—assuming future challenges will resemble past ones. Organizations that prepared extensively for the last financial crisis were often unprepared for pandemic-driven supply chain collapse or the rapid weaponization of economic policy we've witnessed in recent conflicts.
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Effective resource allocation requires sophisticated priority frameworks that consider:
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Portfolio Impact: Which risks could simultaneously affect multiple business lines or markets?
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Strategic Criticality: Which vulnerabilities threaten core competitive advantages or essential operations?
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Mitigation Feasibility: Where can invested resources generate the highest risk reduction returns?
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Time Sensitivity: Which threats require immediate attention versus long-term preparation?
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Cascade Potential: Which risks could trigger multiple simultaneous crises?
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Resource allocation must balance between preventing high-probability, manageable disruptions and preparing for low-probability, catastrophic scenarios. The most dangerous risks are often those that bridge multiple domains—where a sanctions issue becomes a supply chain crisis becomes a reputational emergency.
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5. Monitor Developments & Adapt Accordingly
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Static risk assessments become obsolete the moment they're completed. Organizations that treat risk analysis as an annual exercise rather than continuous intelligence-gathering consistently find themselves behind the curve when disruption strikes.
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Early warning indicators often exist well before mainstream recognition:​
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Policy discussions in specialized committees
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Regional tensions not yet making international headlines
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Industry working group debates signaling regulatory shifts
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Subtle changes in diplomatic rhetoric or trade patterns
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Companies that invest in systematic horizon scanning—whether through internal capabilities or expert partnerships—maintain consistent advantages in preparation time and response quality.
How to assess geopolitical risk:
How MonarchGSA does it
Our experts seeks to understand the intentions, capabilities, and actions of global actors while seeking to understand how their interactions with one another influence global events and shape the overall business operating environment in a specific region, country, state, etc.​
Combined with the knowledge of your business operations and your long-term goals, MonarchGSA creates tailored risk assessments and strategic level guidance to ensure your business is protected from downsides and exposed to lucrative opportunities being driven by geopolitical developments.
​​​Examples of global actors we analyze to produce our risk assessments:
• Governments (United States, China, Russia, India, etc.)
• Global Financial Actors/Institutions (The Federal Reserve, the European Central Bank, J.P. Morgan, etc.)
• Corporations (eBay, Apple, Alibaba, BP, etc.)
• International Multilateral Organizations (The United Nations, The International Monetary Fund, etc.)
• Terrorist and/or Militant Groups (Al-Qaida, Al-Shabab, Jaish-e-Mohammed, etc.)
• International Criminal Organizations (Sinaloa Cartel, Chinese Triad Organizations, Bratva, etc.)
• Non-Governmental Organizations (NGO) (Greenpeace, Amnesty International, World Wildlife Fund, etc.)
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Global actors are influenced, constrained, incentivized (and disincentivized) by many complex factors:
• Economics (Recession, inflation, trade disputes, protectionism, supply chain vulnerabilities, etc.)
• Emerging Technologies (Artificial Intelligence, automation, hypersonic missiles, social media, etc.)
• Conflict (Terrorism, border disputes, civil unrest, ethnic conflict, etc.)
• Ideologies (Liberalism, neo-liberalism, neo-conservatism, Marxism-Leninism, etc.)
• Stage of Development (Resource extraction dominated, industrialized, post-industrial, etc.)
• Cultural (Individualism, collectivism, religious, secular, etc.)
• Type of Leadership (Democratic, authoritarian, fascist, Leninist, etc.)
• Geography (Available resources, impact by climate change, distance from allies and/or adversaries etc.)
• Climate Change (Susceptibility to: flooding, drought, hurricanes, tropical storms, etc.)
• Population (Young vs. old, educated vs. uneducated, large vs. small, etc.)
• Internal Pressure/Opposition (Activist investors, internal policy disagreements, mass protests, etc.)
• External Pressure/Opposition (Sanctions, export-controls, threats of conflict, etc.)