Why Geopolitical Risk is Now a Leadership Issue

The scale of geopolitical uncertainty has significantly reshaped decision-making, risk management, capital allocation, talent, client relationships and organisational resilience. 

As part of our ongoing discussions with members of the Association of Foreign Banks, Odgers spoke with a select group of CEOs and CROs to understand how geopolitical risk is changing the leadership agenda. Participants represented institutions operating in the UK with headquarters across Europe, North America, Asia-Pacific and the Middle East. 

The conversations revealed five key themes. 

1. Geopolitical risk is no longer a specialist risk category 

The first observation was unanimous: geopolitical risk has risen sharply up the executive agenda. 

For some institutions, geopolitical developments have become a standing item in board and executive discussions. For others, they are now embedded in quarterly emerging risk reviews alongside cyber, operational resilience and non-financial risk. 

One CEO described geopolitical risk as "front and centre" of day-to-day management discussions. Another noted that while it had always been present, it had become significantly more consequential over the past 12 months. 

Beyond the frequency of geopolitical events, what has changed is their direct connection to business outcomes. Leaders emphasised impacts on supply chains, energy markets, client behaviour, capital flows, funding markets, exposure to sanctions and operational resilience. 

Several leaders observed that geopolitical events rarely remain isolated. Their influence spreads through markets and institutions in ways that are difficult to predict. 

As one CRO put it: "We're rarely dealing with a first-order risk. The real challenge is understanding the second and third-order effects." 

The implication is that geopolitical risk is viewed less as a standalone category and more as a driver of multiple interconnected risks. 

2. The greatest challenge is the consequence, not the shock 

Perhaps the strongest theme from the discussions was the growing focus on second-order effects. Participants consistently distinguished between the triggering event and its eventual consequences. 

Examples included: 

• Higher energy prices affecting credit quality. 
• Tariffs reshaping trade flows. 
• Inflation influencing borrower resilience. 
• Supply chain disruption changing investment decisions. 
• Shifts in capital flows across regions and currencies. 
• Reduced M&A activity and slower deal pipelines. 

One CEO noted: "We are seeing the shocks. The outcomes are often slower and harder to identify." 

Another observed that credit portfolios had not yet experienced the full impact of the current conflict, raising concerns about lag effects still working their way through the system. 

This distinction is changing the nature of risk leadership. Success increasingly depends on anticipating indirect consequences rather than responding to immediate events. 

3. Geopolitical risk is increasingly a board-level topic 

A decade ago, geopolitical developments might have appeared periodically on risk registers, whereas now they are firmly established as a board issue. 

Several leaders cited the invasion of Ukraine as a turning point. Others pointed to more recent developments in the Middle East and growing tensions around global trade and tariffs. One CEO reflected: "That was the catalyst that brought it onto the board agenda. Since then, it has continued to move up the list of priorities." 

Importantly, boards are increasingly recognising that geopolitical developments have implications far beyond financial performance. Participants highlighted implications for employee safety, workforce wellbeing, operational continuity, reputation and client confidence. 

Several leaders described significant effort being devoted to supporting employees with family connections to conflict-affected regions and ensuring balanced decision-making across global organisations. Geopolitical risk has become as much a leadership challenge as a risk management challenge. 

4. Resilience is a competitive advantage 

A notable finding was that institutions are not responding by becoming uniformly more cautious. Many leaders emphasised the importance of maintaining commercial discipline while remaining alert to changing conditions. 

Several participants outlined the opportunities created by uncertainty as well as the risks. One CEO observed: "In our business, we run towards the flare-ups rather than away from them." While not every institution shared that perspective, many described how geopolitical disruption is creating new patterns of trade, financing needs and client demand. 

Others pointed to increased hedging activity, changing capital flows and demand for risk management solutions. One leader argued that institutions operating in historically volatile environments often possess capabilities that are increasingly valuable globally. 

5. Technology and AI are not the answer yet 

While AI featured prominently in discussions, most participants described adoption within risk functions as very limited. The overwhelming majority viewed AI as a promising capability rather than a mature solution. 

Few organisations reported significant use of AI in risk analysis or geopolitical scenario modelling. As one leader commented: "It is collating information. It is not analysing it." 

Another observed: "You've got to be clever enough to use it. It does not replace the level of intelligence needed to interact with it." 

Several participants described AI as useful for simplifying information, monitoring regulatory developments and improving reporting processes. However, most stopped short of trusting it with complex judgement calls, viewing it also as a source of risk. As one executive put it: "Technology may help us process more information, but the challenge remains interpreting what matters and understanding the implications."  

Several participants expressed concerns about data quality, governance, explainability and cyber vulnerability, as well as over-reliance on technology. 

What will define success?

When asked what success in managing geopolitical risk will look like over the next two to three years, discussions consistently returned to three areas: 

• Anticipation. Several leaders stressed the importance of looking further ahead and avoiding complacency. As one participant reflected: "Failure is not looking far enough down the road or around corners." 
• Adaptability. Successful organisations respond quickly as conditions evolve. This includes operational flexibility, effective escalation processes and strong crisis-management capabilities. 
• Leadership capability. Across the discussions, the most consistent message was that geopolitical risk cannot be managed through frameworks alone. Processes, scenario testing and technology matter, but participants repeatedly highlighted the importance of judgement, communication and leadership. One CEO summarised it simply: "You need the right people, the right processes and the right lens." 

The leadership implication 

The most important insight from these discussions is that geopolitical risk is no longer confined to risk functions. It is shaping strategy, talent decisions, investment priorities and organisational resilience. 

As geopolitical uncertainty becomes a more permanent feature of the operating environment, the distinction between leadership and risk management is becoming less clear. 

For boards, CEOs and CROs alike, geopolitical risk has become less about forecasting events and more about building organisations capable of operating effectively despite them. The key differentiator will be whether organisations develop the leadership capability, judgement and resilience to respond when it arrives. 

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