How to Strengthen GRC Programs Amid Geopolitical Uncertainty

When geopolitical risk is addressed within an organization’s GRC program and tooling, it’s often as a forecasting exercise rooted in risk ratings, headlines and “monitoring the situation.” Or it may be distilled into discrete focus areas such as tax, sanctions and tariff compliance, or anti-money laundering and anti-corruption monitoring. These narrow efforts leave significant operational risk gaps  that may be impacted by global conflicts, regulatory shifts and policy changes. 

To build a GRC foundation that firmly functions as a defense against geopolitical risk, not merely political risk theater, organizations must take a holistic approach rooted in operational strength. Otherwise, these risks may become embedded in and undermine vendor agreements, infrastructure, data flows, regulatory compliance, revenue streams and operational expenses. 

So, how can organizations build better GRC programs that address geopolitical risk in a meaningful way? It starts with addressing the most common and fundamental blind spots, which are outlined here.

Treating geopolitical risk as external to the business

Geopolitical risk is not merely one of a set of externalities. It is embedded and sits across numerous functions of everyday business operations. It exists inside:

• Cloud architecture: Are dependencies in the cloud tooling supply chain fully mapped and visible to the organization? 
• Data residency decisions: In which data centers does a third or fourth party’s (i.e., the vendor’s vendor) data reside?
• Vendor selection criteria: Are vendors’ third and nth parties being accounted for and risk-tiered?
• Workforce distribution: Are employees, contractors, vendors or third parties’ employees and contractors exposed to geopolitical conflict or transnational risks?
• Market expansion strategy: If expanding into new jurisdictions, what is the business climate? How will business developers operate? From where will the organization or its third parties source the needed human capital?

Real geopolitical risk management happens when each of these variables is intentionally designed and mapped to programs of internal controls, not simply observed after the fact.

Addressing the issue country by country

Most organizations map political risk to geography. Operations in perceived “high-risk countries” may be flagged for review, while those perceived as low risk may not be.

However, geopolitical risk generally doesn’t respect borders. A vendor headquartered in a “low-risk country” can still be dependent on infrastructure, labor or regulatory frameworks tied to a high-risk region. A fourth-party vendor’s exposed network could present an attractive target for offensive cyber operations in a conflict the organization isn’t tracking at all.

The result is that what may be viewed as a “tier three vendor in a stable jurisdiction” may actually be a proxy exposure to three different political regimes that were never assessed. And at any moment, a previously stable jurisdiction may suddenly pose high risk. 

Ignoring second-order and downstream exposure

Most third-party risk management programs stop at the vendor, which can create significant unforeseen exposures, especially given that geopolitical risk rarely hits directly. More often, it cascades. Sanctions, trade restrictions, regulatory shifts or civil instability don’t necessarily come to the doorstep. Rather, they can arrive via a vendor’s vendor, and then quietly break something upstream.

By the time it’s felt, it’s no longer purely a risk event: it’s a missed service-level agreement, a broken dependency or a regulatory violation that must be explained.

When visibility stops at tier one, the geopolitical risk program is structurally incomplete.

Assuming regulatory stability 

Most programs operate on an assumption that if a country is politically aligned, it is operationally stable. That assumption is becoming increasingly fraught. Regulatory environments are shifting faster than most organizations can track. Data localization laws, artificial intelligence governance requirements and cybersecurity mandates (to take three examples) aren’t and will likely never be static. They evolve in response to political pressure, economic strategy, national security priorities and countless other factors that can impact business operations. In short, they don’t require regime change to become disruptive.

A single regulatory shift can:

• Restrict how data moves across borders
• Invalidate existing vendor relationships
• Create immediate compliance gaps

All without a single “high-risk country” flag being triggered.

Over-reliance on static risk ratings

Many programs naturally default to country risk ratings, political stability indices or heat maps that make the landscape appear quantified and controlled. The problem with these is that political risk is not static while the ratings models are. At worst, this can lead to a false sense of precision that delays real decision making. Geopolitical risk behaves more like a dynamic system than a fixed condition, shifting with alliances, economic pressure, technological dependencies and regulatory priorities. Any program that relies heavily on static scoring should be reinforced with an architecture that adapts to the risk landscape of the moment. 

Resetting the approach

Geopolitical risk management is not a forecasting problem. It’s an action problem. Traditional GRC practices must be refreshed to incorporate a political risk dimension, particularly as global uncertainties are exacerbated by rapidly changing tensions, economics and technology advancements.  

Attempting to predict the next disruption is not the point. Disruptions, when they happen, are unlikely to have been foreseen.  For that reason, the organizing principle should be to, first, understand the risk environment broadly: what is happening where. Secondly, to determine how the organization is structurally exposed to geopolitical disruption across all dimensions. Understanding both the risk environment and the risk exposure will enable a closer determination of what level of risk is acceptable.  

Building this understanding and embedding it within an existing GRC program requires several shifts:

• From treating geopolitical risk as a siloed or discrete function, to a dimension cutting across enterprise risks and controls.
• From vendor lists to second- and third-order ecosystem mapping.
• From country risk to dependency risk.
• From forecasting to designing for resilience.
• From static scoring to dynamic awareness.

There’s no single off-the-shelf solution to protect against all geopolitical risks. But a well-maintained GRC program can make a significant impact. Organizations that make the case for redesigning their programs and supporting tooling to treat geopolitical risk as a function that extends across enterprise risks and controls will help to insulate their operations from disruption and reduce the potential for harm, compliance failures and excessive costs that can result when threats hit. 

The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.