Marsh Warns of Decision Paralysis Amid Geopolitical Shift

Marsh's Political Risk Report 2026 finds that an accelerating geopolitical transition is creating a level of complexity unseen in decades, reshaping trade, conflict, finance, and digital infrastructure, and raising the risk that organizations could default to short-term thinking rather than long-term strategy, according to Marsh.

The report states that while leaders broadly expect structural changes to the global order by 2035, many are still allocating most planning time to near-term volatility rather than long-term geopolitical realignment, per the report. More than 80 percent of S&P 500 firms cited uncertainty as a factor affecting financial performance in 2025, yet only a small minority of executives view geopolitics as a source of opportunity, according to the report.

Trade is emerging as a central pressure point. US tariff rates rose in 2025 to their highest levels since the 1930s, while China's trade surplus exceeded $1 trillion, developments that suggest a structurally higher-friction global trading system rather than temporary disruption, according to the report. Tariffs accounted for more than 5 percent of US revenue in 2025, and compliance costs are rising, with United States-Mexico-Canada Agreement qualification rates increasing sharply and traffic to the US Harmonized Tariff Schedule website climbing significantly, per the report.

At the same time, the report notes that new agreements—including those between the UK and India, Canada, and Indonesia, and Mexico and the EU—signal that trade liberalization is continuing in selected corridors, even as protectionist measures expand elsewhere, according to Marsh. In January 2026, the EU and Mercosur concluded negotiations for what would become the world's largest free trade area after 25 years of talks, per the report.

Conflict risk is also intensifying. The Geopolitical Risk Index has increased 60 percent from its 2010s average, and conflicts are more widespread than at any time in the past 50 years, according to the report. While many firms focus on high-profile flashpoints such as Russia-Ukraine, the Middle East, and Taiwan, lower-profile disputes—such as the Thailand-Cambodia border conflict—have caused supply chain disruptions, labor dislocation, and operational shutdowns, per the report.

In finance, the report points to subtle but consequential regulatory fragmentation as Basel standards are implemented unevenly across regions, contributing to divergence in bank capital and leverage trends between Europe and the Americas, according to Marsh. Growth in nonbank financial institution lending has prompted questions from the International Monetary Fund and the Bank for International Settlements about whether systemic risk is being relocated rather than reduced, per the report. The New York Federal Reserve places the probability of a recession in 2026 at 25 percent, according to the report.

Rising public debt levels across G7 economies, combined with tighter monetary policy, are increasing debt-servicing burdens and raising the prospect of "fiscal dominance," in which central banks prioritize government debt sustainability over inflation targeting, according to the report. For businesses, that could translate into higher borrowing costs and greater economic uncertainty, per Marsh.

Digital infrastructure is becoming a focal point of geoeconomic competition. The number of countries with foreign direct investment screening mechanisms has more than doubled since 2015, and governments are increasingly scrutinizing data centers, cloud services, and satellite communications through a national security lens, according to the report.

Overall, Marsh said organizations that integrate geopolitical analysis into annual planning and long-term strategy may be better positioned to avoid decision paralysis and manage risks across trade, conflict, credit, and digital infrastructure during this period of systemic change.