Australian boards underprepared as economic weaponisation becomes world’s top risk

Australian boards are underprepared for an era of economic weaponisation that has pushed geoeconomic confrontation ahead of armed conflict and climate change as the world’s most severe short-term risk, the World Economic Forum’s Global Risks Report 2026.

The report ranks geoeconomic confrontation as the number one risk over the next two years, with 18 per cent of global leaders and experts nominating it as the risk most likely to trigger a material global crisis in 2026.

BDO Risk Advisory Partner, Michael Hill, said Australian businesses with offshore revenue, foreign investment exposure or complex supply chains should treat the findings as a board-level governance issue, not a geopolitical sidebar.

“Economic policy is now being used deliberately for strategic advantage,” Michael said.

“For Australian companies, that means sanctions, tariffs, investment controls, capital restrictions and supply chain choke points can become immediate commercial and compliance risks.”

The report describes a widening use of economic levers, including sanctions, trade and investment controls, capital restrictions and the weaponisation of supply chains, as governments pursue geopolitical advantage.

It points to a more competitive global order in which trade, finance and technology are increasingly deployed as strategic instruments rather than cooperative tools.

At the same time, multilateralism is under strain.

Declining trust, rising protectionism and weakening global rules are increasing uncertainty for cross-border trade and investment, while rising inequality and uneven economic impacts are compounding instability across markets and societies.

Michael said boards should move now to map exposure and test resilience. 

“If directors can’t quickly identify where revenue, suppliers, third parties and capital flows are vulnerable to trade restrictions or sanctions, they need to adapt,” he said.

“This is the moment to stress test scenarios, tighten third-party governance and build geoeconomic confrontation into enterprise risk frameworks before disruption lands.”
 

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Tate Papworth 
Manager, Media 
E: Tate.Papworth@bdo.com.au 
Ph: 0433411189