Marsh has flagged growing concern over short-term supply chain failings as global trade faces threats of disruption and protectionism.

The broker’s annual political risks report highlights shifting trade objectives and worsening tension between the US and China as a threat to business groups.  

It says the trends, which have escalated in the past five years, have prompted businesses to use “connector” countries such as South Korea, Hungary and Mexico as pass-throughs for trade.  

However, restrictive trade approaches in the US and China mean connector countries could suffer disruptions to their operations.  

“In a period of heightened anxiety among businesses regarding tensions between countries, the ability of connectors to maintain their newfound significance in the global trade architecture may prove crucial for preventing further fragmentation between geopolitical blocs,” the report says.  

The global broker warns trade fragmentation could increase the risk of war, as countries have fewer disincentives for conflict.  

It notes conflicts have erupted twice as frequently as they did 20 years ago, while the use of international sanctions has increased by 370% since 2017.  

Record public debt levels are another cause for concern, with rising business insolvencies forecast as economic conditions tighten.  

The report also examines energy transition challenges as organisations aim to comply with European Union climate regulations. Marsh says the rules will require importers to track emissions and sourcing, while cracking down on misreporting.  

It says uncertainty and delays implementing the regulations have led to financial risk, with many businesses investing in reporting technologies.

“Heightened risks around the economy, geopolitics and the changing climate are creating an incredibly complex operating environment unlike any ... organisations have experienced in decades,” Marsh Specialty global political risks and structured credit leader Robert Perry.

“Those that build on their ability to comprehend, assess and mitigate the risks facing their operations will likely be better positioned to identify opportunities where others may only see ambiguity, and gain a competitive edge in these uncertain times.”