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Article
Banks Must Prepare for Geopolitical Shocks They Cannot Predict
Senior banking risk executives warn that geopolitical uncertainty is rendering traditional stress testing assumptions increasingly unreliable. They advocate broader scenario analysis, stronger governance, reverse stress testing and faster management responses, emphasizing that financial institutions must prioritize preparedness over prediction while incorporating cyber threats, AI risks and complex geopolitical transmission channels.
Oct 22, 2026
Center for Financial Professionals ,
Tags:
ALM, Treasury and Liquidity Risk
The views and opinions expressed in this content are those of the thought leader as an individual and are not attributed to CeFPro or any other organization
- Banks urged to
prioritize geopolitical preparedness over forecasting accuracy
- Traditional
macroeconomic stress tests may overlook emerging geopolitical
vulnerabilities
- Narrative-based
scenarios can improve risk identification and management engagement
- Reverse stress
testing helps expose hidden exposures and transmission channels
- Stress results must
inform capital planning, liquidity buffers and risk appetite
- International banks
face differing geopolitical impacts across jurisdictions
- Cyberattacks and AI
model failures require greater attention in scenario analysis
- Rapid decisions and
effective governance are essential during crises
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