A decision in mid-July 2025 by the global bank HSBC to disband its internal geopolitical advisory group caught observers by surprise.

The decision was especially perplexing given HSBC’s anomalous position between China and the West, which leaves the bank uniquely exposed to such risks.

Geopolitical risks have radically worsened in recent years, and firms need to adjust quickly to a deeply uncertain world.

SVA has many years of experience of helping companies respond to, and prosper, in the face of geopolitical risks. Our team stands ready to assist.

Stark vulnerability

HSBC’s decision was surprising as the bank is clearly exposed to geopolitical risks. The lion’s share of its operation is in Hong Kong, but its board answers first to regulators in the UK, and only then to Hong Kong and China (as well as the US, thanks to global American reach – see below).

The bank thrived in the years up to 2019, as Hong Kong’s provision of financial services to investors entering the Chinese market engendered rapid growth.

Now, though, HSBC’s systemic importance to Hong Kong’s financial system, and hence to Beijing, leaves the bank caught between a rock and a hard place, at a time of rising tensions between China and the US.

The management’s decision to disband the geopolitical risk group thus seems peculiar.

The widening threat

The crucial point, here, is that the strategic contest between Washington and Beijing is now playing out not only in traditional spheres, such as military sabre-rattling, diplomatic competition, and commercial and tariff rivalry, as widely reported, but also in new and unpredictable arenas.

Of particular importance to financial institutions has been how the US has weaponised its dominance over the international financial system.

In the 2000s, Washington developed powerful anti-money laundering, counter-terrorist financing, and financial sanctions mechanisms. The US ultimately created a regime that forces financial institutions to serve its interests, owing to most banks’ and insurers’ reliance on US dollar clearing.

Supplementing these tools, Washington has also expanded control over digital technologies, such as data centres, cloud computing, semi-conductors and fibre-optic cables, so as to weaken competitor businesses such as Huawei, to collect vast quantities of data with ease, and to develop new chokepoints (perhaps including artificial intelligence capabilities).

The Trump administration’s turn towards tariffs has provided yet another means of coercion, expanding on prior use of strategic export controls. The upshot is that American ability to exert influence over global networks of finance, information and goods has expanded markedly.

These means of exerting pressure have been brought to bear on businesses around the globe, including in Asia. Washington’s actions at first focused on “bandit states” such as North Korea, which were of little account to the global economy, or on terrorist groups, which were seen by most people as bad actors.

Since about 2020, though, the US switched attention to China, the second largest economy in the world, and many states’ main trading partner. In doing so, the US has presented multinational companies with huge geopolitical challenges – and perhaps none more so than HSBC.

Compliance with such measures, and the implications of failing to meet obligations, are becoming ever more costly.

The inevitable response

Of course, every action provokes a response. China has taken steps to respond to this “weaponised interdependence”, including by developing its own digital payment systems, building up semi-conductor manufacturing, and underwriting its own communications and satellite systems. Beijing also makes frequent use of coercive trade restrictions, and has scaled back exposure to the US economy.

Russia has also sought to develop alternative insurance mechanisms, so as to export its oil.

Furthermore, a shift that was at first incremental is now gathering real momentum – and the situation for business is rapidly getting worse. Beijing and Washington increasingly engage in “tit-for-tat” measures, meaning that ordinary companies must stay ahead of the curve on issues as varied as rules on semi-conductors, the terms of sale for ports or infrastructure, and constraints on exports of rare earth magnets.

Hard-pressed executives are finding that keeping up to speed is simply not easy – and that independent advice from SVA is ever more crucial in handling such challenges.

The impact on business

This systemic change is affecting businesses in a myriad of ways. One immediate consideration has been a tilt towards international regulatory divergence, owing to the reduced willingness of authorities to take account of alternative approaches. Contrasting sets of standards in key areas are emerging, bumping up against each other, and leading to friction.

Some “sparks” already affecting companies include regulatory investigations, demands for changes to corporate structure, requests for shifts in personnel, fines or other penalties, and the arrest of, or exit bans on, executives on the Chinese mainland. Hitherto commercial questions, such as where to list, now have deep geopolitical ramifications; an ill-timed IPO in the US or Hong Kong could expose a business to a potentially hostile regulatory response.

The tariff discussions between the US and most of its trading partners, and principally China, only add to the risks. Such tariffs are, at the very least, crimping revenues for companies and governments alike, imposing delays on production, and narrowing chokepoints. Companies may even need to consider withdrawal from certain markets, or find themselves on the wrong side of an ugly trade war.

Of further concern in Asia is that these tariffs are undermining the supply chains that stoked growth in recent decades, with consequences not just for companies dealing in high-technology products, but also for those selling workaday, less controversial goods, such as trainers or textiles. The impact is real; industry is suffering in places such as India, Indonesia, Malaysia, and Vietnam, with implications for political stability and prosperity.

A final concern is a regional conflict. The Trump administration’s perceived fickleness in international relations is reducing US credibility, and therefore Washington’s ability to “call the shots”. Doubts are growing around Asia about US willingness to keep the lid on even minor disputes, such as that between Thailand and Cambodia. Of particular note in that context, of course, are tensions in the Taiwan Strait and South China Sea, which could easily ignite into a hot regional conflict, with severe consequences for commerce.

What to do

HSBC’s decision to disband its geopolitical unit thus is puzzling, given the growing scale and complexity of the geopolitical risks affecting business. Other companies would be ill-advised to follow suit, but rather should act proactively to protect their interests. SVA has considerable expertise in handling such risks, and can advise companies on relevant steps to take, such as:

• Conducting a real-world audit of exposure to geopolitical risks, which takes account of a firm’s specific footprint, and of the trends now emerging, both in terms of the sector, and of relevant regions and markets. SVA’s experience shows that attention to reliance on IT systems, cloud computing, data storage and other technical issues is now as important as might be access to core inputs.

• Analysing the structure of business and operations through the lens of geopolitical risk is crucial. Assessments should take place at a senior level, and on a group-wide basis, as needed. Such independent analysis is as necessary for departures from markets as for new investments, and should include appraisals of alternative investment destinations.

• Establishing managerial responsibility for geopolitical risks, perhaps by creating a “chief geopolitical officer” who reports to the Board, and who has control of a group that handles such considerations – just as financial crime and anti-money laundering mechanisms have been integrated into company structures. SVA provides advice on how to address such issues.

• Putting in place mechanisms to collect, analyse and deliver actionable intelligence on focused matters. Companies often have strong collection mechanisms built into supply chains, but may not analyse, or circulate, findings effectively. SVA has much experience of establishing such systems for businesses.

• Considering the siloing of operations in some jurisdictions, with attention to corporate vehicles, finance, treasury, IT systems, and data management. Separation could protect group interests as the paths of jurisdictions diverge, and so mitigate against the “weaponisation” of regulation.

• Adhering to robust due diligence standards. Boards should continue to require background investigations, and ensure that oversight is in the hands of a “neutral” party – and not under the control of a local team. Such measures should take account of differences in jurisdiction, and are especially important as information becomes harder to gather, and as companies restructure their interests. SVA has a wealth of experience in investigative due diligence.

• Examining supply chains, so as to identify present and future chokepoints. Initial considerations include the inclusion of components sourced from companies targeted by the US or China, such as semiconductors or rare earth magnets, but should also stretch to cover sudden loss of access to shipping routes, the closure of key ports, or an inability to source critical components.

• Monitoring developments for further deterioration is crucial, so as to ensure compliance with relevant laws, and to protect business interests and personnel. SVA can assist in integrating such monitoring into broader risk systems, accessible to senior executives.

• Reassessing of reputational risks would be sensible. Considering the perceived “nationality” of a business, or its subsidiaries, is one point. Companies might also wish to appraise whether partnership with certain firms in sensitive sectors is even worth the risk. Geopolitical tensions can lead to the deliberate distortion of narrative, and result in a company being “dragged into” a row, fairly or otherwise.

• Examining counterparties’ financial positions, which would allow for dexterity in the event of payment issues or collapse arising from geopolitical tensions. These measures should take into account not only the direct impact on the business, but also how a major provider’s failure could affect the market ecosystem.

• Reviewing regulatory risks, so as to assess vulnerabilities in the event of the “weaponisation” of supervision and enforcement actions. Executives must understand that shortfalls could result in investigation or prosecution, justified or otherwise. Regulatory approvals may be of consideration when selling out of an investment.

• Appraising treasury structures, to take account of how intensified capital controls or restrictive banking regulations could affect transfers or access to working capital. Similarly, boards might examine whether restructuring entities, the raising of debt, or the use of financial options or insurance could protect interests – perhaps by shifting assets and liabilities into different entities or jurisdictions.

• Legal departments should examine contracts and insurance policies, to ensure that they take account of actions that might hitherto have been ignored, or have deliberately been carved out. Many insurance policies distinguish between war risk, political violence, and terrorism, for instance. Labour contracts are also of note, as local staff may come under pressure not to work for companies from particular places.

• Preparing operations for a possibly sudden and steep rise in tensions between the US and China, particularly in the event of a Taiwan Straits crisis. Boards should identify key challenges that might arise, such as boycotts, condemnation in the media, regulatory action or protests aimed at a facility, and adjust security mechanisms accordingly. SVA have assisted in many such exercises.

• Appraising the structure and status of crisis management departments. A reliance on a press relations lead may not be appropriate. Rather, fusion with security risk departments, supply chain teams, IT and others may make more sense. Moreover, crisis management teams need to have access to senior decision makers. Simply “putting lipstick on the pig” will not suffice.

• Considering the exposure of plant and personnel in the event of a severe rise in tensions. Staff may find themselves at risk of regulatory action, or of arrest and internment, for instance, or plant and workers may become targets of protests, boycotts, or strikes. A regional conflict could prove especially challenging for shipping or aviation businesses.

• Ultimately, acting decisively is crucial. Companies should identify concerns, undertake an appraisal of the risks, report in full, and then implement essential mitigating measures.

SVA has provided independent advice to many global clients on how to protect their interests in the face of geopolitical risks, and stands ready to assist with regard to any of the above.

SVA

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The company has a great deal of experience in handling geopolitical and other risks.

The firm serves financial institutions, private equity funds, corporations, high net-worth individuals, and insurance companies and underwriters around the world.

SVA has three core lines of business, which are: Business Intelligence and Political Risk; Corporate Investigations; and Special Risk.

SVA also has a dedicated crisis management team which, for our retained clients, stands ready to assist companies during crisis situations.

SVA is based in Hong Kong, Singapore, and London and operates globally.