Geopolitical risk is no longer something only global banks need to track. A recent ProSight article by Matt Schiavenza describes how tariffs, supply-chain shocks, technological disruption, and fast-moving global events are reshaping banks’ risk profiles and day-to-day decisions.
Ludwig Advisors’ Mark Midkiff noted that foreign exchange, interest-rate, and stock markets are closely tied to geopolitical events, and those moves flow straight into bank portfolios. But he urged banks to look far beyond markets. Geopolitics can hit supply chains, counterparties, third-party vendors, employees in different geographies, and even cybersecurity and espionage. “There are a number of cross-cutting influences that banks should think about,” he said during a recent ProSight webinar.
Here are four practical moves highlighted by the webinar panel:
- Add scenario planning to traditional stress tests. Stress tests still matter, but they can’t capture qualitative shocks like coups, sudden regulatory changes, or new sanctions regimes. The panel emphasized that newer technologies now let banks run more complex scenarios that blend market variables with real-world disruptions, not just credit-risk metrics.
- Centralize sanctions oversight—globally. Sanctions are spreading across more regions and shifting faster. As Ludwig Advisors Managing Director Molly Short noted, banks need “a centralized location for screening transactions, making decisions, raising alerts, and communicating across a bank’s global entities.” She stressed that “the more you communicate, the more you share, the better for your global program.”
- Build operational flexibility for real-time hits. The world now reacts instantly. Joe Iraci, founder and owner of the Phoenix-Veritas Group, pointed to how events like the Strait of Hormuz tanker seizure feed quickly into markets: “The 24-hour news cycle and modern technology have made financial markets more volatile, putting pressure on [banking] institutions that may have exposure,” he said. With volatility arriving in real time, banks need trained people empowered to act quickly—not just committees built for slower cycles. “Risk management isn’t just about protecting the downside—it’s also about spotting new opportunities,” Iraci said.
- Local and regional banks need to assess home-market exposure. Foreign-owned plants, local exporters, and globally linked industries can all transmit geopolitical shocks into a community bank’s footprint. As Iraci put it: “Anyone with exposure to a global supply chain has exposure to [geopolitical risk].”
Looking to 2026, Short urged banks to “know their customers,” especially as sanctions involving Latin America may broaden. Iraci warned that Asia holds more than one flashpoint. And Midkiff’s closing message was direct: “Being proactive is important.” For banks of any size, geopolitical risk isn’t a niche—it’s part of the core risk stack now.
