Geopolitical tensions, climate crisis and technological disruption top the risk agenda in 2025

It has become a cliche to say that we are living in an uncertain world, but that doesn’t stop it from being true. The pace of technological disruption, the rapid increase in the climate crisis and new outbreaks of geopolitical tension in 2024 are key emerging risks as we head into 2025.

We’ve scanned outlooks from a variety of forecasters to distil a curated list of the risks that are emerging in 2025.These risks will cut across different sectors, industries and markets, impacting economies in different ways, but all require mitigation of their harms and fast response to take advantage of their opportunities. Growing geopolitical tensions

Coming into 2024, the Russia-Ukraine conflict was the key geopolitical risk, impacting energy prices and inflation, impeding global trade and taking an enormous human toll, both from military action and the knock-on effects of rising food prices. As we enter 2025, this conflict shows little sign of drawing to a close and now new tensions have arisen in the Middle East. The average level of country peacefulness deteriorated by 0.56 percent in the 2024 Global Peace Index and this is the fifth consecutive year that global peacefulness has deteriorated.^[1]

Geopolitical uncertainty was already fuelling a reconfiguration of global trade, with governments taking protectionist measures and changing their supply chains, as well as imposing politically-motivated trade sanctions and economically-motivated embargos. According to Global Trade Alert data, the number of trade interventions have spiked since 2019, although new interventions eased somewhat in 2024.^[2] While trade sanctions against Russia, for example, occupy much of the headlines, many of these interventions are strategic. They are designed to create more opportunities for domestic industries by preventing imports, restructure supply chains for resilience against geopolitical uncertainty or provide subsidies or investment.

In the Institute for Risk Management’s Risk Agenda 2025, geopolitical volatility is the fourth highest risk and economic volatility/financial instability rank second.^[3] The coming year will see businesses and governments move to mitigate the risks of increasing tensions. They will seek to bolster operational resilience, ensure business continuity and secure and diversify supply chains against disruption. Technological disruption

New technologies remain a key risk for 2025, in terms of their disruption to existing businesses, the need for companies to digitally transform while remaining cyber-secure, and in the investment world. An enormous quantity of capital has been poured into the artificial intelligence (AI) space, for example, but Gartner’s famed Hype Cycle for Emerging Technologies shows that in 2024, some elements of the AI boom are headed towards the trough of disillusionment.^[4] The theory goes that new technologies are overhyped as they emerge, leading to too much expectation, which then leads to disappointment, before the technology hits the “slope of enlightenment” and finally the “plateau of productivity”. However, there’s no guarantee of getting there and many technologies have dropped off the “peak of inflated expectations” and disappeared. As an investment, AI has suffered from a somewhat woolly interpretation by the market as everything from machine learning algorithms for medical breakthroughs to generative AI to chatbots, and 2025 may be the start of a rethink about where the true opportunities lie.

For businesses, however, both technological disruption and cybersecurity are key risks. Respondents to the Internal Audit Foundation’s global Risk in Focus 2025 survey cited cybersecurity as the top risk for the next three years (69%) and digital disruption including AI second (59%). ^[5] Technological advances also topped the risks in the Institute for Risk Management’s (IRM) Risk Agenda 2025.^[6]

The Risk in Focus 2025 study said; “Modern business strategies must balance opportunity created by innovative technologies with their impacts on cybersecurity risk, data governance, and regulations on data privacy. Yet incorporating AI into business operations is considered vital to efficiency, productivity, and competitiveness.”^[7]

In the IRM’s Risk Agenda 2025 report, respondents said the top five technology developments impacting on risk were, in order; AI, Big Data, Robotics and autonomous vehicles, the Internet of Things and Blockchain technology.^[8]

Climate crisis climbs the agenda

Last year, the Internal Audit Foundation’s global survey put climate change and the environment at number 14 in the list of risks, cited by just 19% of respondents. But this year, that has moved up a spot with 23%, and in the risk expectations for the next three years, it rockets to number 4, cited by 39% of the respondents.^[9]

As the climate crisis takes hold, its risks multiply, including the physical risks, transition risks and legal and regulatory risks. Physical risks from extreme weather events threaten lives and livelihoods around the world, impact insurance and reinsurance sectors, and tend to intersect with poverty in ways that could have devastating results. In 2022, the World Bank estimated that 1.81 billion people, or 23% of the world population, are at risk from flooding, and over 170 million of them are already in extreme poverty.^[10] The World Health Organisation estimates that 700 million people are at risk of being displaced by drought by 2030.^[11]

According to insurance firm Aon; “Communities around the globe were impacted by the nearly 400 notable disasters in 2023. From extreme heat to severe storms and earthquakes – these events highlight the threat catastrophe risk poses to the way we live and work…Only 31% ($118 billion) of the economic losses ($380 billion) were covered by insurance.”^[12]

While every business and individual needs to respond to the physical risks, a number of industrial sectors - and national governments - are open to transition risks. As calls for the energy transition and more climate-aware manufacturing grow, industries from mining and energy to textiles and fashion are at risk reputationally. The shift to greener methods and energies could also lead to stranded assets and loss-making business units. Managing the shift will be key to mitigating this risk.

Regulations may come from national or international bodies to encourage the energy transition and companies must be ready to adapt to new rules. At the same time, a growing number of activists are taking matters into their own hands and using the courts to push for change by suing companies^[13] and even governments^[14] for not holding to their targets.

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