Marsh report: crippling debt will make more countries go broke
Operational and strategic risks to trade, finance and investment are being driven by today’s heightened geopolitical risk environment, characterised by volatility, uncertainty and a widening range of possible outcomes, Marsh’s Political Risk Report 2025 has determined.
Because of this, organisations are evolving risk management strategies to prepare for the challenges and opportunities that may arise in the latter half of the decade.
The report warns of the potential implications of record public debt, with the International Monetary Fund stating that global public debt surpassed $100 trillion at the end of 2024, and Standard & Poor’s predicting an increase in sovereign defaults over the next decade.
Marsh said certain geopolitical assumptions may no longer hold true and suggests frameworks or methods to take their place across three key areas: the reshaping of global trade with more disruption and protectionism; how geopolitical risks will create operational challenges; and the opportunities, politics and compliance obligations of the energy transition.
“Meanwhile, others forecast business insolvencies to continue rising this year before stabilising at elevated levels due to low demand and tight financial conditions.”
Marsh highlights its leadership in risk, strategy and people, helping clients to operate in a dynamic environment.
The report is designed to help guide companies navigating the political and economic risk landscape.
Angela Duca, global head of credit specialities, said: “Many longstanding assumptions — such as the stability and security of trade flows — are in flux. Where confidence is lacking, organisations may benefit from new methods to understand today’s risk environment and inform their decisions.”
The report delves into the growing role of political leaders in shaping outcomes: “Conflicts are occurring nearly twice as frequently as they did in 2005, and the number of international sanctions has increased by 370 per cent since 2017.
“Two drivers of the recent surge in conflict and other difficult-to-predict events are the declining adherence among countries to international norms and the widespread fracturing of co-operation, which has previously helped to deter or resolve disputes.
“According to the global risks report 2025, long-term geopolitical risk projections signal greater challenges ahead as mechanisms for collaboration face ongoing pressure.
“This breakdown in systemic constraints can also encourage political leaders to act according to their personal incentives and fears, with less regard for a structured response from the international community.
“Therefore, while scenario planning remains an important method to enhance organisational preparedness for current or future geopolitical events, adapting scenarios to reflect a less structured or constrained global environment is essential.
“Organisations should still consider developing scenarios that account for various geopolitical outcomes, such as increased protectionism or regional conflicts, while also accounting for the beliefs, policies and motivations of political leaders.
“Neglecting to consider the motivations of individual leaders could overlook a critical factor that increasingly influences foreign policy and business risk outcomes.
“In such an environment, it is essential for companies, especially those with international supply chains and footprints, to develop geopolitical risk management programmes that include scenario planning that is adapted to their unique exposure profile.”
• For more on Marsh’s Political Risk Report 2025, see Related Media
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