Geopolitical Risk: Is Your Investment Strategy Ready?

Maria Hernandez, a small business owner in Atlanta’s West End, had ambitious plans to expand her artisan soap shop in early 2025. She’d secured a loan, scouted a second location near the BeltLine, and was ready to sign the lease. Then, news broke of escalating tensions between China and Taiwan, sending ripples through global markets. Suddenly, Maria’s suppliers, who sourced key ingredients from Southeast Asia, were facing delays and price hikes. She began to wonder: are geopolitical risks impacting investment strategies like hers more than anyone realizes? What can small business owners do with the news?

Maria’s story is a microcosm of the challenges facing businesses and investors in an increasingly volatile world. Geopolitical risk, broadly defined as the risk that political events will disrupt or negatively impact business operations and investment returns, is no longer a distant threat; it’s a present-day reality. From trade wars to armed conflicts, these events can have significant consequences for everything from stock prices to supply chains.

Understanding Geopolitical Risks

What exactly constitutes a geopolitical risk? It’s a broad category encompassing a wide range of events, including:

• Armed conflicts and wars: Russia’s invasion of Ukraine in 2022, for example, sent shockwaves through the global energy market, causing prices to spike.
• Political instability and regime changes: A coup in a key trading partner country can disrupt trade flows and create uncertainty for investors.
• Trade wars and sanctions: The ongoing trade tensions between the U.S. and China have led to tariffs and other trade barriers that impact businesses on both sides.
• Cyberattacks: State-sponsored cyberattacks can target critical infrastructure and disrupt business operations.
• Terrorism: Terrorist attacks can disrupt economic activity and damage investor confidence.

These events can impact investments in several ways. They can lead to:

• Market volatility: Geopolitical events often trigger sharp swings in stock prices and other asset values.
• Supply chain disruptions: Conflicts and trade wars can disrupt the flow of goods and services, leading to delays and shortages.
• Increased inflation: Disruptions to supply chains and energy markets can push prices higher.
• Currency fluctuations: Geopolitical uncertainty can lead to fluctuations in exchange rates, which can impact the profitability of international investments.

Maria’s Dilemma: A Case Study in Supply Chain Vulnerability

Back to Maria. Her artisan soaps relied on shea butter from Ghana, essential oils from France, and packaging materials from China. The escalating tensions in Asia put her Chinese supplier in a precarious position. Shipping costs increased, delivery times became unpredictable, and the supplier even hinted at potential material shortages. This is not an abstract concept; it’s affecting real people right here in Atlanta.

I had a client last year, a small manufacturing firm near the intersection of Northside Drive and Howell Mill Road, that faced a similar problem. They sourced electronic components from Taiwan. When the threat of a Chinese invasion loomed, their lead times doubled, and they had to scramble to find alternative suppliers, which significantly increased their costs.

Expert Analysis: The Domino Effect

According to a 2025 report by the Atlantic Council Atlantic Council, geopolitical risks are becoming increasingly interconnected and difficult to predict. “The world is becoming more multipolar, with a growing number of actors vying for influence,” the report stated. “This creates a more complex and volatile environment for businesses and investors.”

The Russia-Ukraine war, for example, had a ripple effect on global food prices, as Ukraine is a major exporter of wheat and other grains. A report by the International Monetary Fund (IMF) found that the war contributed to a 30% increase in global food prices in 2022. This is a clear example of how a regional conflict can have global economic consequences.

The issue is not just the event itself, but the uncertainty it creates. Will tensions escalate further? Will sanctions be imposed? Will supply chains be disrupted for an extended period? These unknowns make it difficult for businesses to plan and invest.

Here’s what nobody tells you: many small businesses simply don’t have the resources or expertise to adequately assess and manage geopolitical risks. Maria, for instance, didn’t have a dedicated risk management team. She was focused on running her business, not analyzing geopolitical trends. This is where seeking advice from a financial advisor who understands global events is vital.

Mitigating Geopolitical Risks in Your Investment Strategy

So, how can investors protect themselves from the impact of geopolitical risks? Here are a few strategies to consider:

• Diversification: Don’t put all your eggs in one basket. Diversify your portfolio across different asset classes (stocks, bonds, real estate, commodities) and geographic regions. This can help to cushion the impact of a geopolitical event that affects a specific market or industry.
• Hedging: Consider using hedging strategies, such as buying put options or investing in safe-haven assets like gold, to protect your portfolio from downside risk. A put option gives you the right, but not the obligation, to sell an asset at a specific price, which can protect you from losses if the price falls.
• Due diligence: Thoroughly research the companies and countries you invest in. Understand their exposure to geopolitical risks and their ability to manage those risks. Reviewing a company’s SEC filings (specifically the “Risk Factors” section) can provide insights into potential geopolitical vulnerabilities.
• Stay informed: Keep up-to-date on global events and their potential economic impact. Follow reputable news sources like Reuters and AP News and consult with financial advisors who specialize in geopolitical risk analysis.

We ran into this exact issue at my previous firm. A client had a large position in a tech company that was heavily reliant on exports to China. As trade tensions between the U.S. and China escalated, the company’s stock price plummeted. We advised the client to reduce their exposure to the company and diversify their portfolio into other sectors and regions. This helped them to mitigate their losses and protect their overall investment strategy.

The Role of News and Information

Accurate, timely information is vital. But not all news is created equal. Be wary of sensationalized headlines and unsubstantiated rumors. Stick to reputable news sources and be critical of the information you consume. Consider subscribing to geopolitical risk analysis services that provide in-depth assessments of global events and their potential impact on investments.

The Pew Research Center has consistently found that Americans are increasingly reliant on social media for news, which can make them more vulnerable to misinformation. A 2024 Pew study found that 48% of Americans get their news from social media at least sometimes. This highlights the importance of being a discerning consumer of news and information.

Maria’s Resolution (and What You Can Learn)

Maria, after consulting with a financial advisor, decided to postpone her expansion plans. Instead, she focused on strengthening her existing supply chain by diversifying her sources and building stronger relationships with her suppliers. She also started to explore alternative ingredients that were less vulnerable to geopolitical disruptions. She even started a small-scale herb garden behind her shop on Ralph David Abernathy Blvd, sourcing some ingredients locally.

Her story underscores a key point: even small businesses can take steps to mitigate geopolitical risks. It requires awareness, planning, and a willingness to adapt to changing circumstances. It’s not about predicting the future (which is impossible), but about preparing for a range of potential scenarios.

What’s the best investment you can make right now? Time. Time spent understanding the world, assessing your risks, and building a resilient investment strategy.

As we head into 2026, prepare your portfolio with a clear understanding of potential economic shifts.

Don’t wait for a crisis to hit. Start building a resilient investment strategy today. Proactive planning and informed decision-making are your best defenses against the unpredictable nature of global politics. A good first step is to review your portfolio with a financial advisor and discuss your exposure to geopolitical risks.