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Geopolitical uncertainty is major financial risk for corporates

Corporate treasurers and other financial professionals say geopolitical risk is having a greater impact on company profits than in previous years, according to a risk survey by the Association of Financial Professionals (AFP). The 2017 AFP Risk Survey, in collaboration with Marsh & McLennan Companies, found that almost half of the financial professionals surveyed said their companies are exposed to greater earnings uncertainty than they were three years ago.

The survey's key findings include:

  • 52 per cent of treasury and finance functions are considering the impact on their organisation’s growth expectations due to a geopolitical event;
  • 46 per cent said their c-suite and board were concerned about geopolitical risk in 2016;
  • 51 per cent said that forecasting risk will be more difficult in three years' time;
  • 53 per cent said that loss of customers/revenue is a key concern with regard to geopolitical risks.

The graph below shows how financial professionals think geopolitical risk will affect their business:

CTMfile take: This survey highlights the fact that geopolitical risk is now perceived to be one of the main sources of uncertainty affecting supply chains, cash and FX management. Financial professionals are particularly concerned about the loss of customers and revenue, and the effect of geopolitical instability on currency positions.

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