The global geopolitical landscape is changing faster than many business models can adapt. For banks, this represents a paradigm shift in risk management: resilience is increasingly determined by their customers’ supply chains.
Global value creation networks are under sustained pressure and are being weighed down by trade conflicts, rising energy prices and political tensions. This makes supply chains a strategic risk driver for banks and other financial institutions.
In the current environment, risk models based on past data are increasingly reaching their limits. Many key risk drivers for banks today arise from complex, closely interlinked dependencies that cannot be adequately captured by traditional risk categories.
Particularly along global supply chains – for example, in the case of critical raw materials, key technological components or trade and sanctions regimes driven by geopolitical factors – risks often manifest themselves indirectly and in a non-linear manner. The recent war in the Middle East – with the blockade of the Strait of Hormuz, attacks on energy and transport infrastructure, and sharp price fluctuations – has once again highlighted how closely geopolitical events and economic stability are intertwined.
Supply chain analyses systematically highlight these interdependencies and enable banks to identify structural vulnerabilities in their portfolios at an early stage, beyond direct credit exposures. In doing so, they create a key prerequisite for forward-looking portfolio management in line with modern emerging risk management practices in banks – particularly in crisis situations.
Geopolitical crises affect European banks in a variety of ways. On the one hand, banks are directly affected by changes in corporate demand for banking products. On the other hand, these crises have an indirect impact via the customer portfolios in the loan book, as geopolitical tensions affect companies’ value creation.
If regions become inaccessible, critical resources run short or transport routes are disrupted, the business models of counterparties in the portfolio come under pressure. These effects often impact entire sectors simultaneously and take effect within a short space of time.
This has the following implications for banks’ corporate clients:
What begins as a geopolitical event thus affects the economic stability of companies throughout the supply chain – and ultimately has a direct impact on the bank’s risk exposure.
This is why the analysis of supply chains is also becoming increasingly important for banks. It reveals where geopolitical risks may arise, long before they are reflected in key performance indicators, market movements or actual defaults. It is therefore crucial for banks to proactively understand the causes of geopolitical risks in their portfolios and to manage them actively at an early stage.
In summary, an analysis of supply chains thus provides targeted insight into where dependencies exist, where risks are concentrated within the portfolio, and under what conditions geopolitical tensions can transform from a latent vulnerability into actual pressures.
For banks, therefore, one thing is clear: resilience begins with transparency. Only those who systematically understand where and how their own portfolio depends on geopolitically relevant regions and resources can assess and prioritise risks in an informed manner and, above all, manage them in exceptional geopolitical situations.
This transparency can be achieved through a multi-stage analytical approach, which progresses step by step from an overarching view of the portfolio to an in-depth analysis of individual counterparties. The starting point is a structured analysis of the loan portfolio using the KPMG supply chain screening prototype.
The immediate added value for banks lies, in particular, in
Geopolitical uncertainty cannot be eliminated. However, it can be structured, assessed and managed. Systematic transparency regarding supply chain dependencies enables banks to derive specific management strategies, particularly for:
This enables geopolitics to be integrated as a risk factor into the bank’s internal management framework. The aim is to professionalise the way in which geopolitical uncertainty is managed and to strengthen decision-making capabilities, even under changing conditions.
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