Global: Geopolitical tensions, increased protectionism destabilising supply chains in 2025
Source: Middle East Insurance Review | Apr 2025
Organisations are more at risk of acute supply chain failure in 2025 because of heightened global geopolitical tensions and protectionist trade strategies, according to Marsh’s Political Risk Report 2025.
The report states that shifting market and political dynamics present both energy transition challenges and opportunities for organisations, especially in relation to carbon credit markets (CCMs) and debt-for-nature swaps (DFNSs).
According to the report, organisations that trade with connector countries – such as Vietnam, Mexico, South Korea and Hungary – to circumvent existing or anticipated trade controls, or have suppliers doing the same, may be prone to greater trade policy-induced disruption in the months and years ahead. As a result of deteriorating relations between major trading partners, governments may also impose trade barriers on goods from connector countries – especially those that include components from the originally-targeted country – which could create significant global supply chain volatility.
To improve their resilience to supply chain shocks stemming from the current geopolitical landscape, the report recommends that organisations review China’s commitment to its trade strategy and the US’s underlying trade policy objectives and consider the extent to which the current connector model will be sustained.
The report asserts that shifting market and political dynamics present both energy transition challenges and opportunities, echoing the findings of the World Economic Forum’s Global Risks Report 2025, in which environmental risks dominate the 10-year horizon. While global CCMs took a major step forward at COP29 and DFNSs have also gained traction, challenges remain in both CCMs and DFNSs regarding political risk and the potential for non-delivery. Further, increased climate compliance obligations, especially those originating from new European Union regulations, may present operational risk challenges for organisations.
Marsh Specialty global political risks & structured credit leader Robert Perry said, “Heightened risks around the economy, geopolitics and the changing climate are creating an incredibly complex operating environment unlike any other organisations have experienced in decades. Those that build on their ability to comprehend, assess and mitigate the risks facing their operations will likely be better positioned to identify opportunities where others may only see ambiguity, and gain a competitive edge in these uncertain times.” M