Stefano Biondi of Banca Mediolanum explains how geopolitical fragmentation is transforming risk management from prediction to resilience. Institutions must rethink stress testing, funding models, and risk appetite frameworks as tariff shocks, currency vol
Geopolitical tensions are no longer
background noise for financial institutions. They are now central drivers of
strategic risk.
According to Stefano Biondi, Group
Chief Risk Officer at Banca Mediolanum, the shift represents a structural break
from the assumptions that defined the globalization era.
“Today’s geopolitical tensions are
fundamentally reshaping how Risk Management teams think about, model, and
govern strategic risk,” he says. “The shift is not incremental - it represents
a move away from relatively stable, globalization-driven assumptions toward a
world defined by fragmentation, volatility, and political power dynamics.”
For Biondi, the most important change
is conceptual. Risk management is moving away from precision forecasting and
toward resilience.
“Risk management is shifting from
prediction to resilience and adaptability,” he explains.
“That means replacing point forecasts
with stress testing and treating preparedness for multiple adverse futures as
the new baseline rather than an extreme scenario.”
Institutions are discovering that
exposure to tariff, currency, and sanctions-driven volatility is highly uneven.
Some risks are well mapped. Others remain embedded in second- and third-order
effects that only surface under stress.
“Financial Institutions are exposed
to Tariff indirectly through changes in borrower cash flows and collateral
values,” Biondi notes.
Currency volatility can also affect
capital ratios and the effectiveness of hedging strategies. These are not
headline exposures. They are structural linkages that often sit beneath
traditional risk dashboards.
“These are second- and third-order
exposures that many institutions still fail to capture adequately,” he warns.
“In today’s environment, the greatest danger is not volatility itself - but
exposure you don’t realize you have until it becomes irreversible.”
To respond, firms are redesigning
stress testing frameworks. The evolution goes beyond adding geopolitical
scenarios. It involves rethinking frequency, governance, and purpose.
“Firms are materially redesigning
stress-testing frameworks to cope with geopolitical disruption, liquidity
fragmentation, and abrupt policy shifts,” Biondi says.
What has changed is not just what
institutions test, but how often and how strategically they do it.
Continuous scenario-driven stress
ecosystems, explicit political triggers, and an emphasis on speed and contagion
are becoming standard features.
