A new year may have arrived but what lies ahead remains mired in the same old uncertainty.
Indeed, the only thing businesses and investors can be sure of is that geopolitics have taken “center stage” as the defining feature shaping the global risk landscape, Jimena Blanco, chief analyst, global risk insight, at Verisk Maplecroft, in a webinar on Wednesday. The world has become less predictable, she said, with “traditional alliances shifting and new battlegrounds emerging.”
Related Stories
While the Bath, England-based consultancy’s Political Risk Index identifies 99 countries that have experienced a significant uptick in political risk over the past three years, it’s not the only data signal that warrants attention: A “perfect storm” of civil unrest, conflict, challenges to government authority, trade tensions, resource nationalism and sanctions also have the potential to foist parallel but distinct risks at certain times and convergent ones at others, Blanco said.
“Because these risks are widespread and affect every region of the globe, chances are you will find yourself exposed to them, albeit to various degrees depending on the industry or the specific jurisdiction that you’re evaluating,” she said.
If there’s one common theme threaded through Verisk Maplecroft’s political outlook, however, it’s that strategic competition between major powers is creating a new baseline level of risk and uncertainty for businesses and investors, Blanco said. Take, for instance, President Donald Trump’s return to the White House on Monday. The aggressive tariffs he has threatened to impose on China, Mexico and others could upend decades of trade policy, throttling globalization while driving up supply chain costs and potentially stoking inflation in the United States.
But though the American electoral system stood up to the rigors of democracy on Nov. 5, Verisk Maplecroft’s Democratic Governance Index found that nearly half of the countries that headed to the polls in 2024 experienced so-called procedural irregularities, including the observable use of violence and intimidation. A high rejection rate of incumbents has also resulted in a large number of new or recently instated governments for which voters have “high expectations and very little patience,” Blanco said.
“With these new governments taking office, businesses and investors are exposed to potential instability in the operating environment, and the specter of growing divisions and frustrations among the electorate could threaten to spill over onto the streets,” she said. Verisk Maplecroft’s Civil Unrest Index also suggests that widespread protests could affect twice as many countries as those where unrest will recede this year.
Certainly, there is little safe harbor, agreed Hugo Brennan, head of EMEA, global risk insight, noting that conflict-affected areas across the planet have grown 65 percent since 2021 to encompass 4.6 percent of the entire global landmass, sans Antarctica, or up from 2.8 percent only three years ago.
In fact, if Brennan had one “headline takeaway” from the risk management group’s data, it’s that global conflict risks have increased “very significantly” over the past four years, with countries in Europe, Asia, the Middle East and Africa all making the list of worst performers on Verisk Maplecroft’s Conflict Intensity Index. The battle over Ukraine continues apace, as does civil wars in Myanmar and Sudan. In sub-Saharan Africa, a “conflict corridor” centered around the Sahel in East Africa has doubled in size since the start of 2021. Much also continues to hinge on a rapprochement between Hamas and Israel.
“The direct exposure of the assets of publicly listed companies to conflict is currently fairly limited: only 3.68 percent of the assets of the highest risk sector—oil and gas—are located in conflict-affected areas currently, according to our newly released asset risk exposure analytics,” Brennan said. “But that exposure could quickly change if, for instance, the regional war in the Middle East escalates to the point that oil-producing states were drawn in directly.”
Global supply chains are especially sensitive to war risks, he said. One notable example is the ongoing campaign by the Houthis to attack Western shipping in the Red Sea, which has forced major cargo shipping companies to divert vessels to longer, more expensive routes around Africa’s Cape of Good Hope. Shipping firms that continue to use the Red Sea-Suez Canel route face higher insurance costs because of the elevated physical security risk. Russia’s invasion of Ukraine “likewise roiled” global supply chains from energy to agro-commodities.
“These examples teach us the lesson that the outbreaks of new conflicts anywhere in the world could trigger a new wave of security, sanctions, cyber supply chain and reputational risk that corporates, investors and insurers would need to navigate,” Brennan said.
Even key “connector” nations on which the global supply chain relies are facing challenges, said Reema Bhattacharya, head of Asia, global risk insights. Mexico, for example, is grappling with considerable risks from organized crime and violence, making it a difficult environment in which to operate. Vietnam, for another, struggles with serious human rights concerns such as forced labor, which Bhattacharya said have deepened over the past five years despite its trade ties with Western markets.
“Additionally, Vietnam’s growing trade surplus with the U.S. could attract new restrictions, particularly under Trump’s new administration,” she said. “The country is increasingly seen as a proxy manufacturing hub for China, where ‘made in Vietnam’ often translates to ‘made in China.’”
Meanwhile, Mexico faces a “critical juncture” in July 2026 with the review of the United States-Mexico-Canada free trade agreement, a focus of which will be preventing Chinese companies from using Mexico to bypass American tariffs. Already, the Central American nation is reportedly working to replace Chinese imports with products solely manufactured within North America, Bhattacharya said. Even so, achieving “complete disentanglement” from Chinese goods and services is “easier said than done,” she added.
China has already been “strategically adapting” to ongoing sanction pressures, such as the Section 301 tariffs that the United States has imposed on some solar energy products. Many companies are establishing manufacturing facilities in countries such as Indonesia and Laos, where solar exports remain “relatively unaffected” by current U.S. trade protections, Bhattacharya said. This “strategic relocation,” she said, has allowed the Chinese to “maintain dominance” in the American solar market despite the disincentives.
“In fact, U.S. solar imports from Chinese-controlled factories in Southeast Asia have actually surged in recent years, and new Chinese-owned plants in the region are now supplying nearly half of last year’s U.S. solar panel installations,” Bhattacharya added. “So this sort of highlights and gives us a sense of the challenge facing U.S. manufacturers in competing with cheaper, more subsidized Chinese products.”
If anything, services and investments will increasingly become subject to politically motivated restrictions. The world, Bhattacharya said, appears to be moving toward a fragmented economic system that will continue to drive costs up for everyone.
“While countries like Mexico and Vietnam are finding ways to thrive, the overall trend is quite clear: Global trade is becoming less efficient and more expensive [and] successfully de-risking supply chains from geopolitical rivals will come with a hefty price tag for businesses, especially in Western democracies,” she said. “This means that consumers and companies are going to foot the bill for a substantial realignment of global production of goods. And for businesses, resilience and adaptability will probably be the key to navigating the challenges of a new economic reality.”
