Good morning. Greg McKenna back again until Sheryl returns from Fortune Impact tomorrow. The modern CFO must contend with a world that has become riskier and more unpredictable. This includes Russia’s brutal and ongoing invasion of Ukraine, conflict spreading in the Middle East, and China menacing Taiwan—all while a general rise in populist and nationalist sentiment pose massive risks to global business.
Geopolitical risk is everywhere but not everyone is equally concerned. European finance chiefs sense this danger more acutely than their peers in Asia and the United States, according to Deloitte’s annual European CFO survey.
Out of more than 1,300 respondents, only 2% said they didn’t expect their businesses to be impacted by geopolitics. In eight of the 13 countries surveyed—Austria, Denmark, Germany, Iceland, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom—they ranked it as one of the three biggest risks their organizations face.
In contrast, another survey from the firm found about 60% of American CFOs viewed the economy as their top external risk, followed by geopolitics and cybersecurity. Deloitte's Asia-Pacific edition of the survey last year found 80% of the region’s CFOs worried most about a global economic slowdown.
It’s worth noting that this survey classified cybercrime as a geopolitical risk, and it ended up top of the heap of concerns. Seventy percent of European CFOs classified the threat as “severe,” more than any other category, with 80% of those polled saying they view such attacks as “likely.”
The war in Ukraine, unsurprisingly, also looms large. Finance chiefs in Portugal cited the conflict as their primary concern, and CFOs in Italy, Norway, Ireland, and Iceland ranked it as their second biggest threat.
“None of these countries borders Russia, proving that CFOs fear the broadening of the political and economic repercussions of a worsening conflict rather than the immediate threat of invasion or escalation,” wrote Richard Horton and Ram Krishna Sahu from Deloitte’s EMEA research team, along with Rolf Epstein, who leads the firm’s CFO program and private segment consulting practice in Germany.
Politics in the eurozone itself, meanwhile, have CFOs on edge, particularly after far-right parties made big gains in the recent European parliamentary elections. The rise of populist politics can impact business even when these parties do not win office, the report noted. To fend off populist opponents, governments may introduce restrictions on trade and immigration that can disrupt operations and increase costs.
“Companies should focus on diversifying operations and engage in robust scenario planning to mitigate these risks,” the report said.
Many harbor similar fears when they look across the Atlantic as election day in the U.S. approaches. Political instability in America has become the top concern for finance chiefs in Germany, Europe’s largest economy and the world’s third-biggest exporter, replacing the war in Ukraine as their primary perceived threat.
“The U.S. has become more protectionist during the past two presidencies,” the report noted, “and the trend toward higher tariffs may persist.”
European CFOs are particularly attuned to the threat of increased protectionism in global trade. It’s another risk, however, that finance chiefs must reckon with everywhere.
Greg McKenna
greg.mckenna@fortune.com
