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Navigating global uncertainty

Navigating global uncertainty in a shifting geopolitical landscape

In today’s interconnected and rapidly changing world, businesses face a multitude of risks that can impact or halt operations unexpectedly. These risks are no longer confined to traditional hazards such as fire, flood, or equipment failure. Rather, they are intricately tied to the complex web of global politics, international relations, and worldwide events. As a result, business interruption (BI) insurance has become a crucial risk management tool for companies.

This article explores the evolving landscape of business interruption (BI) risks stemming from geopolitical and global events, and how If Insurance stands by our client’s side in responding to these unprecedented challenges.

At its core, business interruption refers to any event or circumstance that disrupts a company’s ability to conduct its normal operations. Typical triggers may include natural disasters, fire, or equipment malfunctions. However, in a world marked by increasing uncertainty, the spectrum of potential causes has broadened to include cyberattacks, pandemics, civil unrest, and the ripple effects of international conflicts.

Changes in global markets demand robust Business Continuity Planning. Business interruption risks affect different sectors and industries in different ways. In volatile times, preparedness is therefore vital for companies, whether the risks emerge from geopolitical disputes, extreme weather events, or other causes.

Pekka Sarpila, Head of Property Risk Management Services at If notes, “In our field work we have noticed that very often companies have business continuity plans in place, but that an impact analysis has not been done or the continuity plan has never been stress-tested in a crisis exercise. In today’s businesses where supplier networks are complex, it is important to dig into these risks further to uncover the dependencies that may hit the business severely.”

Global supply chains and geopolitical shocks

Modern businesses often rely on intricate global supply chains, sourcing raw materials from one part of the world, manufacturing goods in another, and selling to customers across continents. Any disturbance in this chain—whether due to international sanctions, export bans, or sudden border closures—can trigger far-reaching business interruption.

The Russia-Ukraine war, for example, disrupted energy supplies and agricultural exports, sending shockwaves through industries worldwide. Similarly, tensions in the South China Sea could jeopardise shipping routes vital for the flow of goods between Asia and the West.

Geopolitical risks such as trade wars, embargoes, and diplomatic tensions can materialise overnight, leaving companies scrambling to adjust. These events may lead directly to business closures or indirectly to shortages, price volatility, and logistical delays—all of which can result in significant financial loss.

We in the insurance industry have seen that companies who are well-prepared will be able to shift to alternative suppliers quickly, while others will struggle to continue operations.

Pekka Sarpila, Nordic Head of Property Risk Management Services

Pandemics and global health crises

The COVID-19 pandemic highlighted the vulnerability of businesses to global health emergencies. Lockdowns, quarantines, and restrictions on movement forced companies to suspend or radically alter their operations for extended periods. From an insurance perspective, the pandemic spurred unprecedented debate over the scope of BI coverage, particularly whether losses stemming from government-ordered shutdowns or the absence of physical damage were insurable events.

Civil unrest and political violence

Political instability, protests, and acts of terrorism can also disrupt business activities. Even in countries with a long history of stability, sudden outbreaks of unrest can lead to property damage, curfews, or roadblocks that prevent employees and customers from accessing business premises.

Cyber threats and digital warfare

As companies digitise operations, the risk of cyberattacks and hacking continues to grow. A ransomware attack can bring an
entire company to a standstill, resulting in days or weeks of lost income. When such attacks are linked to geopolitical hostilities, attribution, and coverage become especially complex.

Strategies for companies to mitigate business interruption risk

Given the evolving landscape, companies must adopt a holistic approach to risk management that goes beyond insurance alone. Key strategies include:

Diversifying supply chains: Sourcing from multiple regions or suppliers reduces dependency on a single geopolitical hotspot.
Scenario planning and stress testing: Regularly evaluating how various crises would impact operations helps identify vulnerabilities and contingency plans.
Cybersecurity investments: Strengthening digital defences and developing robust incident response plans can reduce the likelihood and impact of cyber-related interruptions.
Crisis communication plans: Clear communication with employees, customers, and stakeholders is vital during disruptions.
Reviewing and customising insurance policies: Collaborating with brokers and insurers to understand exclusions, add necessary endorsements, and ensure coverage aligns with evolving risks.

business woman looking out from the window

To stay ahead of these BI risks, it is important to have solid Business Continuity Planning. Just as importantly, companies should evaluate scenarios and conduct regular reviews of potential risks that can impact their operations. Thorough planning will help ensure that solutions put in place are indeed fit for purpose, or at least as fit for purpose as possible. For example, having an alternative channel to reach your employees is vital when cyber criminals have compromised regular channels of communication.

The future of business interruption insurance

In an increasingly volatile world, the boundaries between traditional and non-traditional risks continue to blur. Transparent communication, ongoing risk assessment, and collaboration between public and private sectors are essential to building resilience.

In conclusion, business interruption is not a peripheral concern but a central element of corporate risk management. Geopolitical tensions, global events, and emerging threats have redefined the scope of interruptions and the insurance solutions required to address them. By understanding the evolving risk landscape and working closely with insurance professionals, companies can navigate uncertainty and safeguard their operations against the unforeseen.

At If Insurance, we help clients in their loss prevention work and collaborate closely with them, seeking to uncover potential risks that can interrupt or impact their daily operations.