Australian boards unprepared for increasingly volatile geopolitical environment

Geoeconomic conflict poses the most immediate and significant global threat, according to the World Economic Forum’s Global Risks Report 2026.

Eighteen per cent of global leaders and experts nominated global confrontation as the number one short-term risk, and the most likely to trigger a global crisis in 2026.

Governments responded by seeking geopolitical advantage, in turn building a more competitive global order which, according to the report, sees trade, finance and technology tools serving increasingly insular means.

BDO risk advisory partner Michael Hill highlighted that “economic policy is now being used deliberately for strategic advantage.”

He continued: “For Australian companies, that means sanctions, tariffs, investment controls, capital restrictions and supply chain choke points can become immediate commercial and compliance risks.”

Along with the widespread use of trade and economic levers, the report highlighted the strain multilateralism is under as trust declines, protectionism rises and global rules are weakened. Accordingly, uncertainty characterises cross-border trade and investment, compounding rising inequality and further imbalancing financial impacts – resulting in increased market and societal instability.

For Australian businesses with offshore revenue, foreign investment exposure or complex supply chains, Hill urged the findings be treated as board-level governance issues, and suggested mapping exposure and testing resilience.

“If directors can’t quickly identify where revenue, suppliers, third parties and capital flows are vulnerable to trade restrictions or sanctions, they are flying blind,” he explained. This focus will allow room for capital stewardship better prepared to weather an unstable environment.

Hill concluded: “This is the moment to stress test scenarios, tighten third-party governance and build geoeconomic confrontation into enterprise risk frameworks – before disruption lands.”

Respondents to the Global Risks Perception Survey were asked to consider four factors to determine the findings. These were risk landscape – which assessed the likely impact and severity over a number of timeframes, consequences – as in the range of potential impacts and relationship between risks, risk governance – the approaches most likely to drive action and reduce risk, and outlook – the predicted evolution of various global risks.

Of the findings, the two-year and 10-year outlooks gave the clearest picture of projected risk. The lowest rank, "calm", was selected by less than 1 per cent in both the short-term and long-term outlooks, while "stable", the second-lowest rank, was selected at 9 per cent and 10 per cent, respectively.

"Unsettled" and "turbulent" received the largest proportions of votes – the former at 40 per cent in the short term and 32 per cent in the long term, and the latter at 42 per cent and 38 per cent, respectively. "Stormy", the highest-ranked, suggesting imminent global catastrophe, polled at 5 per cent for short-term likelihood and, concerningly, 19 per cent over a 10-year outlook.

While geoeconomic confrontation ranked first in the report’s current global risk landscape, other notable changes were identified. Economic downturn and inflation moved up eight positions from relatively low rankings in 2025, while the asset bubble burst saw a similar uptick, and economic downturn saw one of the biggest increases in severity score.

The identified risks often overlapped and led to flow-on effects, such as the growing risk of unchecked technology and reduced interest in addressing environmental concerns.