Why market volatility demands a new approach to governance, risk, and trust

This article was first published in The Economic Times Edge Insights.com on April 28 2026. Please click here to read the article.

Global trade is undergoing structural realignment, with geopolitical conflicts behaving as a key risk driver, disrupting energy markets, commodity flows, and established trade routes, and resulting in sustained volatility across global markets. The recent escalating tensions in the Middle East have intensified the disruptions in the global energy supplies and global shipping routes, impacting roughly 20 per cent of Global Oil flows and trapping estimated $4 Billion to $5 Billion worth of cargo each day^1,2. Businesses worldwide are increasingly operating in a risk-intensive environment shaped by geopolitical uncertainty, rapidly evolving sanctions regimes, heightened regulatory activism, and shifts in capital allocation priorities.

Within this evolving landscape, the Indian economy is advancing several major trade arrangements with key partners such as the United Kingdom, European Union, United States, Oman, New Zealand and others³. Recent developments focus on deeper strategic and economic alignment, including critical technology and supply chain initiatives with the US, and active negotiations for comprehensive trade and investment agreements with the EU. With nine Free Trade Agreements³ (FTAs) signed over the last four years and several more under negotiation with the US, EU, and other strategic partners-offers opportunities to expand cross-border business activity, capital flows, and supply chain integration. However, this deeper integration also materially elevates risk exposure, embedding Indian organisations more firmly within complex international regulatory frameworks and increasing their vulnerability to global market disruptions, compliance risks, and external shocks.

There are three factors defining today’s dynamic environment and the structural shifts in the global markets:

Acceleration of change

Regulatory updates, sanctions, and enforcement expectations evolve rapidly, often across multiple jurisdictions simultaneously
Expanded risk surface

Complex third-party ecosystems, cross-border operations, and digitalisation have increased exposure points
Heightened scrutiny

Boards, investors, and regulators expect timely visibility and accurate information into emerging risks and decisive actions

Over the past few years of unpredictable times including the pandemic, there has been a notable shift in the perception of governance, risk management, and investigative readiness from being support functions, to core enablers of resilience, credibility and investor confidence. Today, organisations face an external environment where trade dynamics are constantly evolving and access to resources and supply chains are disruptive. Organisations with robust frameworks around governance, risk management, and compliances are better positioned to manage uncertainty, respond to regulatory change, and sustain trust through disruption. Strong governance and risk frameworks are becoming indicators of long-term value protection, influencing investment decisions alongside traditional financial metrics.

Regulatory changes, sanctions and embedded compliance

Sanctions regimes and regulatory expectations continue to evolve at a dynamic pace, shaped by geopolitical developments and enforcement priorities.

In the year 2025, 1,325 persons were added to the Specially Designated Nationals and Blocked Persons (SDN) List and 143 persons were added to the Commerce Department’s Entity List ⁴. Indian businesses were indirectly impacted by US and EU sanctions for purchasing Russian Oil.

Similarly, new regulations such as UK’s failure to prevent fraud offense brings in a new level of corporate responsibility for businesses with a UK connection. Under this offense, large organisations may be held criminally liable where an employee, agent, subsidiary, or other “associated person”, commits a fraud intending to benefit the organisation⁵.

Organisations with robust frameworks are not required to respond reactively to each change. As a result:

Regulatory and sanctions monitoring is automated and continuous

Third-party and transaction screening adapts dynamically

Exceptions and alerts are escalated and dealt with on a near real time basis

Compliance is embedded into business processes rather than applied retrospectively

Impact on Indian businesses

The Companies Act, 2013 holds directors and independent directors responsible for corporate governance, focusing not merely on strategic direction, but also on risk management and regulatory compliance to ensure organisation sustainability and stakeholder interests. For Indian organisations, particularly those accessing global capital, participating in cross-border trade, or operating under FTAs, the consequences of non-compliance are increasingly significant.

Potential impacts could result into:

Regulatory action across multiple jurisdictions
Material reputational damage affecting investor and partner confidence

Financial penalties and operational restrictions
Increased personal liability and accountability for boards of directors and senior management

As Indian businesses operate on a global stage, governance failures are no longer localised events, they carry global repercussions. Early detection and investigative readiness are increasingly viewed as risk-mitigation mechanisms, not mere indicators of failure.

How can Indian businesses navigate through the flux?

Going forward, organisations could anticipate to face:

Potential regulatory activism and enforcement

Increased scrutiny of governance and controls in transactions and capital raises

Greater focus on third-party, sanctions, and financial crime risk

Higher expectations of board oversight and documentation

Volatility is likely to remain a defining feature of the market environment, reinforcing the need for structural resilience rather than episodic responses to build trust. Organisations that invest in strong governance, embedded compliance, and proactive risk and investigation frameworks are better equipped to navigate volatility with confidence. While these capabilities do not eliminate disruption, they enable organisations to respond decisively, preserve stakeholder trust, and sustain long-term value.