Ahead of Risk Evolve 2026, we spoke with Stefano Biondi to explore geopolitical tensions are reshaping how institutions assess and manage strategic risk. The era of globalization-driven stability has given way to fragmentation, policy volatility, and power-driven economic shifts.

How are today’s geopolitical tensions fundamentally changing the way Risk Management teams assess strategic risk?

Today’s geopolitical tensions are fundamentally reshaping how Risk Management teams think about, model, and govern strategic risk. The shift is not incremental—it represents a move away from relatively stable, globalization-driven assumptions toward a world defined by fragmentation, volatility, and political power dynamics.

Risk management is shifting from prediction to resilience and adaptability: 

• Stress testing instead of point forecasts

• Preparedness for multiple adverse futures becomes the “base case”

Where are institutions most exposed to tariff, currency, or sanctions-driven volatility — and which risks are still flying under the radar?

Institutions today are exposed to tariff, currency, and sanctions-driven volatility in very uneven ways. Some exposures are well understood and actively managed; others remain structural, indirect, and dangerously underestimated. Financial Institutions are exposed to Tariff indirectly through changes in borrower cash flows and collateral values. Furthermore, FI are exposed to currency volatility that ultimately may impact capital ratios and exposure hedging. 

These are second- and third-order exposures that many institutions still fail to capture adequately. 

In today’s environment, the greatest danger is not volatility itself—but exposure you don’t realize you have until it becomes irreversible.

How are firms stress testing for scenarios such as geopolitical related disruption, liquidity fragmentation, or sudden policy shifts?

Firms are materially redesigning stress-testing frameworks to cope with geopolitical disruption, liquidity fragmentation, and abrupt policy shifts. What’s changed is not just what they test, but how often, how deeply, and how strategically they do it. Today’s approach includes:

• Continuous, scenario-driven stress ecosystems

• Explicit inclusion of political and policy triggers

• Focus on speed, contagion, and irreversibility

Stress testing is now treated as a strategic decision-support tool, not just a capital adequacy check.

What does geopolitical induced volatility mean in practice for funding strategy, funding access, and liquidity risk management? 

Geopolitically induced volatility has very concrete, operational consequences for how firms fund themselves, access markets, and manage liquidity. In practice, it forces a shift away from assumptions of continuous market access toward a world where funding can become segmented, conditional, or disappear abruptly.

Higher Value is Placed on “Sticky” and Domestic Funding since Geopolitical volatility increases the risk that cross-border funding evaporates first.

Therefore, there is Greater emphasis on: 

• Retail and stable corporate deposits

• Domestic institutional investors

• Relationship-based funding rather than transactional markets

The Trade-off being between Higher average cost of funding and Lower refinancing risk under stress. Institutions increasingly accept higher structural funding costs as the price of survivability.

How should risk leaders prepare for more protectionist policy environments without over-constraining balance sheet flexibility? 

Risk leaders face a real tension in more protectionist environments: prepare for policy shocks and fragmentation without freezing the balance sheet or destroying strategic optionality.

The answer is not to “de-risk everything,” but to redesign flexibility so it survives political constraints. Use Risk Appetite as a Flexibility Tool, Not as a Constraint. Risk appetite is often written as a set of limits that lock the balance sheet in place during stress. In order to adapt to this new reality Firms should instead try to Include conditional risk appetite in their framework and Pre-define when limits can flex or tighten.