This year’s Munich Security Conference has been a chilling wake-up call for Europe, and risk managers must rethink their strategies as the geopolitical situation in Ukraine deterioriates.

The CEO of Airmic has said the rapidly deteriorating geopolitical situation in Ukraine has forced many risk managers to scrap plans drawn up at the start of the conflict.

A recent Airmic pulse survey found that 79% of organisations are closely following the latest developments in the Russia-Ukraine war, while fewer are sticking to geopolitical risk plans and contingencies created when the conflict began.

Russia, Ukraine

There are growing tensions around the war as the USA holds bilaterial talks with Russia. Recently, US president Donald Trump described Ukrainian president Volodymyr Zelenski a dictator, in what is widely seen as a blow to international efforts to reach an agreement to end the hostilities.

European leaders met in Paris amid concerns that the US was also looking to exclude European nations, which have supported Ukraine, from any negotiations over a lasting peace deal.

Graham said: “This year’s Munich Security Conference has been a chilling wake-up call for Europe, as the US looks set to rewrite the rules of the transatlantic alliance.

“Businesses are monitoring and navigating the short-term risk outlook, while scenario planning for the longer view in the context of all this geopolitical volatility. In this situation, building resilience is imperative as businesses need to be prepared to deal with significant disruption caused by geopolitical risk.”

Analysts said the conference in Munich starkly illustrated how the post-World War Two security architecture for Europe has changed fundamentally, where Europe can no longer automatically rely on the US to come to its aid.

Amid the ongoing uncertainty Airmic sought to ask members how they were approaching the risks emerging from the ongoing fighting. They found just 21% of respondents said their organisations are following geopolitical risk plans and contingencies drawn up earlier during the war.

Graham added: “Risk professionals are tearing up plans and contingencies drawn up earlier during the Russia-Ukraine war, in recognition of how fundamentally the dynamics have changed. Nevertheless, scenario planning and horizon scanning are the keys for risk professionals in preparing for geopolitical risk, while organisations must resist the temptation to be events-led.”

She continued: “The events in just the past few days have tested to the limits the UK government’s aim of bridging the gap between America and Europe, whether in terms of the global security architecture or trade.

“Risk professionals and their organisations need to be even more attuned to the interconnected nature of such geopolitical risks, given the implications for fiscal policy and the economy. Organisations have to be agile in responding to these interconnected risks while being in a permanent state of readiness.”

Hoe-Yeong Loke, head of research at Airmic, told Strategic Risk that as the war in Ukraine enters a new stage, risk managers are taking the decision to redraw their risk plans amid concerns that the dynamic nature of the current situation has made previous strategies redundant.

He explained. “[Risk professionals] are closely following the latest developments in order to draw up new plans and contingencies for their organisations. The biggest risk here is greater uncertainty as to what to expect next from the war, with implications for supply chains, expropriation risk and business strategy more broadly.”

“We have known for some time that the Trump administration would bring a new approach to dealing with the Ukraine-Russia war. What we were less expectant of was a rethinking of the security architecture for Europe, which businesses and organisations need to factor into their strategies.”

He added inaction was not an option.

“Airmic has been advising risk professionals that horizon scanning and scenario planning are the keys to preparing for emerging geopolitical risk,” Loke explained. “However, organisations should resist the temptation to be events-led and retain agility for when further developments or crises may strike.

“But agility is not a licence to improvise. Organisations need to constantly challenge, stress-test and update baseline assumptions about the likelihood and impact of the risks they face.”

Alex Frost, Airmic’s chief markets officer said the risk map of Europe was being re-written.“The security environment in Europe has fundamentally changed overnight, with huge implications for UK, European and global businesses not just around the safety of people and other physical assets, but also around cyber systems and energy supplies.

“While a rehabilitated Russia is likely to continue to be assertive and disruptive, perhaps there is a silver lining if the Trump Administration’s retreat from Europe means European states are given a shove in the direction of greater coordination on security and defence, economic reform and protecting critical national infrastructure. In each of these areas, the experience and skills of the risk profession will be vital to success.”