A treasurer’s survival guide to navigating geopolitical risk

For decades, corporate treasurers in the Middle East operated within a broadly predictable geopolitical framework. Long-held assumptions about international security architecture, trade currencies and supply-chain stability – largely underwritten by a US-led global order – formed the bedrock of financial strategy. 

That era is over. We have entered a more fluid and multipolar world, where the fundamental tenets of risk management are being rewritten. 

The most significant shift is the fragmentation of the global security landscape. The perception of a waning, all-encompassing security umbrella means the era of singular, binding alliances is giving way to a model of multi-alignment.

Nations such as the UAE and Saudi Arabia are diversifying their strategic partnerships with global powers like China and Russia. For treasurers, this is impacting asset security. 

The probability that localised conflicts could affect physical infrastructure – ports, pipelines and data centres – has increased. This demands a recalibration of political-risk insurance and a more dynamic approach to counter-party risk – recognising that yesterday’s ally could be tomorrow’s neutral party.

Concurrent with this security shift is a fundamental rewiring of the global financial system. The expansion of the Brics+ economic bloc, which now includes the UAE, Egypt and Iran, is accelerating a move to reduce dependency on the US dollar. 

This push for de-dollarisation will inevitably lead to a significant increase in non-USD-denominated trade, introducing new currency risks and hedging complexities for regional profit-and-loss statements. 

Furthermore, sanctions are no longer a one-way street. We are rapidly heading towards a future in which companies must navigate competing and potentially conflicting US, Chinese and other international sanctions regimes. 

The long-held assumption of the dollar as the sole, stable vehicle for regional trade can no longer be taken for granted. The weaponisation of neutral actors through secondary sanctions makes prospective scenario gaming all the more important.

How can companies navigate this volatile environment? 

First, treasurers must diversify their financial architecture. Over-reliance on a handful of Western banking partners is now a concentration risk. The strategy must involve building the capability to transact, hold reserves and secure financing in other key currencies, such as the UAE dirham, Saudi riyal and Chinese yuan. 

This extends beyond simply opening accounts; it means establishing deep relationships with well-capitalised regional and Asian financial institutions that possess nuanced, on-the-ground insights. Practically, this involves exploring regional payment systems and multi-currency cash pools to optimise liquidity across different regulatory environments, creating redundancy to avoid the crossfire of potential sanctions.

Second, liquidity management must become more dynamic and forward-looking. In an environment prone to sudden shocks, “just-in-time” cash management is a high-risk strategy. 

Companies should maintain higher liquidity buffers and, crucially, conduct regular geopolitical stress tests. These are financial simulations of plausible crises. 

Treasurers should model the working-capital impact of scenarios such as the sudden sanctioning of a major regional bank, the imposition of currency controls in an important market, or a disruption to trade finance lines due to a diplomatic spat. This proactive modelling allows for the development of a pre-planned response, ensuring a structured reaction rather than a panicked scramble.

Third, supply-chain continuity must be built around the principle of “no single point of failure”. This requires a treasurer’s perspective on logistics. It involves diversifying shipping routes to avoid dependency on single chokepoints and regionalising supply chains where possible. 

Financially, it also means de-risking the supply chain by ensuring suppliers are not all reliant on a single financial ecosystem. Establishing secondary sourcing or manufacturing capabilities within different geopolitical blocs can turn a vulnerability into a strength, protecting physical delivery and financial settlement.

Ultimately, the role of the corporate treasurer must evolve from that of an operational manager to a strategic adviser. This requires embedding geopolitical analysis directly into the firm’s financial DNA by quantifying risks, using scenario planning for budgeting, and establishing cross-functional committees to translate geopolitical shifts into potential balance-sheet impacts. 

The companies that thrive in this new landscape will be those whose financial leaders are as fluent in the language of trade corridors and alliances as they are in cash flow and credit.

Nicolas Michelon is managing partner at Alagan Partners