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Geopolitical Risk and Financial Stability

Geopolitical risk is becoming an increasingly important consideration for financial stability. This article sets out a structured framework to explain how geopolitical shocks could affect financial stability through a range of channels, from market disruptions to operational and security risks. The impact of geopolitical shocks is likely to differ from more traditional macro-financial stress in several ways, including by generating new operational challenges for the financial system – reinforcing the importance of robust contingency planning.