Navigating a Fragmenting World Order – Geopolitical and Geoeconomic Risks for Canadian Financial Institutions

This report examines how the shift from hyperglobalisation toward a more fragmented, geoeconomic world order is creating new and interconnected risks for Canadian financial institutions. Building on a “Triple Exposure” framework of Canada’s structural position, it identifies three compounding layers of risk: operational risks arising from sanctions, regulatory conflicts, cyber threats, data restrictions, and dependence on U.S.-controlled financial infrastructure; strategic and investment risks associated with exposure to contested markets, stranded or illiquid assets, resource nationalism, and fiduciary tensions over geopolitical de-risking; and downstream risks from wider economic, political, and security disruptions. The report emphasises that these exposures can interact with and amplify one another, allowing geopolitical shocks to cascade through compliance obligations, portfolio valuations, funding markets, and the domestic political environment, with Canada’s concentrated financial sector potentially increasing systemic consequences. It proposes a proportionate risk management framework based on exposure mapping, compliance protocols, market-specific strategies, scenario planning and stress testing, geopolitical intelligence, and clear governance arrangements to better position institutions to navigate geopolitical and geoeconomic fragmentation.