Risk Navigator - Beyond Sanctions: Advancing State Power
Risk Navigator is Ashurst Risk Advisory’s risk insight series, redefining risk management in an age of accelerating change and disruption, supporting business leaders to navigate uncertainty through expert risk insight, building resilience along the way.
Please watch for the launch of our Risk Navigator Hub, following the launch of Ashurst Perkins Coie.
The post-war consensus on free trade is being dismantled. For decades, economic sanctions served as the primary coercive instrument of international diplomacy, deployed to contain threats, destabilise regimes, and curtail nuclear proliferation. However, in today's era of shifting geopolitical power and growing fragmentation, sanctions are proving increasingly ineffective as a principal tool for achieving economic, foreign policy, or national security objectives. Targeted entities, particularly states, can circumvent sanctions relatively easily, often exploiting new transactional alliances formed with partners willing to avoid or not enforce prescribed restrictions.
In response, governments across Western economies are turning to a broader set of instruments: tariffs, industrial policy, and investment controls, not merely as tools of economic management, but as forms of statecraft designed to protect national security, advance foreign policy objectives, and redefine national competitiveness. This is not a temporary disruption but a structural shift that exposes businesses to a new and serious set of risks.
This edition of Risk Navigator examines how and why this shift has occurred, what it means for businesses operating across borders, and how organisations can build geopolitical readiness through prevention and adaptation.
Key Points
- Sanctions are no longer effective in isolation. North Korea and Russia have demonstrated that determined states can circumvent even the heaviest sanctions by exploiting geopolitical divisions and forming new alliances, undermining their coercive power.
- Tariffs have become offensive instruments of statecraft. Tariffs are no longer defensive measures but tools to extract concessions, including capital investment, technology transfer, and supply chain relocation, a trend accelerated, not initiated, by the US Liberation Day tariffs of April 2025.
- Western economies are converging on interventionism. The UK, EU, and US have each independently adopted a more interventionist posture, through investment controls, industrial policy, and tariffs, linking economic policy directly to foreign policy and national security.
- The new environment is defined by unpredictability, politicisation, leverage, and speed. Policy changes can emerge without warning, commercial decisions can trigger government retaliation, and retaliatory measures can escalate rapidly across entire supply chains.
- Traditional risk frameworks are inadequate. Likelihood-and-impact matrices with periodic review cycles cannot address risks that materialise suddenly and carry immediate operational and commercial consequences.
- Geopolitical risk now spans the entire business lifecycle. The effects of this new statecraft can manifest across every function, from strategic planning and product development to manufacturing, logistics, and maintenance.
Practical Implications for Organisations
Boards and senior management must treat geopolitical risk as a core strategic discipline, not a periodic compliance exercise. This requires embedding geopolitical risk sensing into core business functions and ensuring that reporting and escalation channels surface emerging policy signals before they materialise.
Ashurst Risk Advisory advocates a dynamic approach that distinguishes between prevention - proactive strategic and operational choices made before risks materialise; and adaptability - rapid, rehearsed organisational responses that mitigate impact when risks cannot be fully prevented. Diversifying supply chain dependencies away from jurisdictions exposed to tariff escalation is an example of a preventive measure, whilst pre-established protocols and clear escalation channels enable adaptive responses to sudden changes in market access.
Organisations should urgently assess their exposure across a number of dimensions: supply chain concentration and vulnerability to tariff escalation; over-reliance on manufacturing or sourcing in countries likely to face trade restrictions; the impact of significant cost increases on critical materials and components; and sole or single-source supplier dependencies that limit the ability to respond to sudden policy changes. The businesses best positioned to navigate this environment will be those that treat geopolitical risk as a live, continuously evolving dimension of their operations, where risk prevention, adaptability, and speed of response differentiate the winners from the losers.
Risk Navigator - Advancing State Power
PDF 1.9 MB
Other authors: Chris Tran, executive.
