Gerd-Jan Wiggen & Laurent Claassen: Building resilience to geopolitical risks
This column was originally written in Dutch. This is an English translation.
By Gerd-Jan van Wiggen, Partner at Probability & Partners, and Laurent Claassen, Senior Advisor to Boards & Executives | Lecturer & Speaker
The world order is in flux. US dominance is being challenged by China, and President Trump’s second term is creating further uncertainties in the areas of international trade, economic stability and geopolitical alliances.
Geopolitics is therefore no longer a subject exclusively for heads of government and diplomats. The risks associated with these geopolitical shifts affect financial institutions and businesses both directly and indirectly.
Whilst export controls and sanctions were long regarded as a niche area within legal or compliance departments, they have now evolved into a strategic instrument within the geopolitical landscape. States are increasingly using economic dependencies as a means of exerting power, and technology, raw materials, payment systems and trade flows have become part of a geopolitical playing field in which economic interests and national security are increasingly intertwined.
For companies and financial institutions operating internationally, this represents a fundamental shift. The question is no longer simply whether a transaction is legally permissible and complies with the applicable rules, but also whether it will still be permissible tomorrow. Export controls and sanctions are evolving rapidly, becoming increasingly complex and are ever more frequently a response to geopolitical developments that are virtually impossible to predict.
This is also changing the risk profile. Whereas organisations used to focus primarily on screening customers and countries, attention is increasingly shifting towards indirect risks. Goods reach their final destination via intermediaries, distributors or logistics hubs; technology is supplied via various countries; and financial transactions take place through complex international structures. It is precisely these indirect routes that make it increasingly difficult to determine where products ultimately end up and who ultimately has an interest in a transaction.
Furthermore, regulators and enforcement authorities have raised their expectations. Organisations are not only expected to check sanctions lists, but also to demonstrate that they have insight into their entire value chain, understand the ultimate end-user and can justify why they consider a particular risk to be acceptable. The quality of decision-making is becoming at least as important as the outcome itself.
For banks, this means they must look beyond traditional customer due diligence and the screening of payment transactions. They increasingly find themselves in a position where they must assess trade flows in which the geopolitical context is at least as important as the financial transaction itself. The same applies to businesses. An export control issue no longer begins with customs clearance, but right from the start – in sales, procurement, product development and strategic decision-making regarding markets and supply chains.
Perhaps that is the most important lesson to be learnt from the current geopolitical reality: export controls and sanctions are no longer merely a compliance issue, but a business issue. Organisations that merely react to new regulations are constantly playing catch-up. Organisations that incorporate geopolitical developments into their strategy, their supply chain and their customer engagement are better equipped to cope with unexpected developments.
This calls for a different way of working. Not by adding more and more checks, but by continuously assessing geopolitical risks. Which markets are becoming more geopolitically sensitive? Which suppliers or distribution channels are increasing our dependence? Which technologies might fall under export controls tomorrow? And which signals warrant a reassessment of a customer or transaction?
The greatest challenge therefore lies not in complying with today’s rules, but in being prepared for tomorrow’s rules. In a world where geopolitics increasingly dictates the rules of international trade, resilience becomes a competitive advantage. Organisations that systematically link geopolitical developments to their export control and sanctions policies not only limit their legal risks but also strengthen their strategic agility.
Geopolitics is no longer a subject for diplomats alone. It increasingly determines which markets remain accessible, which technology may be supplied, and which business relationships will still be possible tomorrow. The biggest mistake organisations can make today is to think that export controls and sanctions are merely a compliance issue. In reality, they are a geopolitical business risk. And business risks belong in the boardroom. For directors, the question is not whether geopolitics affects the company, but how well the organisation is prepared for it.