Why Your Company's SEC Report Can't Ignore Geopolitics Anymore

The days when companies could treat geopolitics as someone else's problem are over. In 2025, the intersection of global tensions and corporate disclosure has never been more critical—or more scrutinized by regulators.

The New Reality: Geopolitics Meets Securities Law

The SEC has identified geopolitical events, including the Russia-Ukraine war, as key areas requiring enhanced disclosure. This isn't just regulatory theater; it reflects a fundamental shift in how market risks are understood and managed.

Consider this: The geopolitical risk index has spiked around major conflicts throughout history, from world wars to the Cuban Missile Crisis and after 9/11, with higher geopolitical risk consistently forecasting lower investment, stock prices, and employment. Today's companies operate in an environment where a conflict in Eastern Europe can disrupt supply chains in Asia, energy markets in Europe, and commodity prices globally within hours.

Beyond Ukraine: The Expanding Geopolitical Landscape

While the Russia-Ukraine conflict has dominated headlines, several interconnected themes including climate change, cybersecurity threats, and the ongoing war have created increased concern for energy security worldwide, making this a top 2025 geopolitical risk. Companies are discovering that geopolitical risks are rarely isolated events—they cascade across sectors and continents.

The SEC Division of Corporation Finance has specifically noted that companies should consider whether Russia's invasion of Ukraine, the Israel-Hamas conflict, or any other geopolitical conflicts have direct or indirect material effects on their business that should be disclosed in Form 10-K filings.

What the SEC Actually Expects

The SEC's expectations around geopolitical risk disclosure have evolved significantly. In light of increased geopolitical tension, companies must consider risks related to sanctions imposed on any countries where they have business relationships, including recently imposed sanctions against third-country suppliers.

This means your Item 1A Risk Factors section can't simply mention "political instability" in generic terms. The SEC wants specificity:

• How do sanctions affect your supply chain?

• What happens to your revenue if trade routes are disrupted?

• How exposed are you to currency volatility in affected regions?

• What are your contingency plans for operational disruptions?

The Materiality Test in a Multipolar World

Business leaders need to focus on building strategies and frameworks that take their geopolitical response from reactive to proactive, including developing holistic geopolitical risk management approaches. This shift from reactive to proactive thinking is exactly what the SEC is looking for in risk disclosures.

The materiality threshold for geopolitical risks has effectively lowered. Events that might have been dismissed as "remote possibilities" five years ago are now considered reasonably likely scenarios requiring disclosure. Companies must assess not just direct impacts but second and third-order effects.

Real Consequences of Inadequate Disclosure

Many S&P 500 companies have disclosed they have not experienced past material cybersecurity incidents; however, geopolitics and remote work have created new vulnerabilities. This highlights a common pitfall: companies often focus on what hasn't happened rather than what could happen.

The SEC has been increasingly active in commenting on inadequate risk factor disclosures. Companies that fail to adequately address geopolitical risks face:

• Comment letters requiring additional disclosure

• Delayed SEC approval of filings

• Potential enforcement actions

• Investor lawsuits for inadequate risk disclosure

Building a Geopolitically-Aware Disclosure Framework

Forward-thinking companies are reimagining their disclosure processes. This means:

Establishing Cross-Functional Risk Assessment Teams: Legal, finance, operations, and government relations teams must work together to identify and assess geopolitical risks.

Creating Dynamic Risk Monitoring: Unlike traditional risks that might be assessed annually, geopolitical risks require continuous monitoring and rapid assessment of materiality.

Developing Scenario-Based Disclosure: Rather than generic statements, companies are crafting disclosures based on specific geopolitical scenarios and their potential business impacts.

Integrating ESG and Geopolitical Considerations: The SEC's climate disclosure rules, though currently stayed due to legal challenges, demonstrate the regulator's continued focus on systemic risks. Geopolitical risks often intersect with ESG concerns, requiring integrated disclosure approaches.

The Investor Perspective

Institutional investors are increasingly sophisticated in their geopolitical risk assessment. They're not just looking for boilerplate risk factors—they want to understand how management thinks about and prepares for geopolitical scenarios.

BlackRock, Vanguard, and other major institutional investors now employ geopolitical risk analysts who scrutinize company disclosures for evidence of strategic thinking about global political trends. Inadequate disclosure can impact institutional investment decisions and stock valuations.

Practical Steps for Your Next Filing

1. Audit Your Current Disclosures: Review your latest 10-K Risk Factors section. Are your geopolitical risk discussions specific to your business model and geographic exposure?

2. Map Your Global Footprint: Identify not just where you operate, but where your suppliers, customers, and strategic partners are located. Consider political stability in each region.

3. Assess Regulatory Changes: Monitor sanctions regimes, trade policies, and regulatory changes in key markets. These can create material impacts overnight.

4. Quantify Where Possible: Move beyond qualitative discussions to quantify potential impacts where feasible. "Significant revenue exposure" is less helpful than "approximately 15% of revenue from operations in Region X."

5. Update Regularly: Consider whether material geopolitical developments between quarterly filings require current report disclosure under Form 8-K.

The Strategic Imperative

The conversation has shifted from whether companies should address geopolitical risks in their SEC filings to how comprehensively they can do so. This isn't just about regulatory compliance—it's about competitive advantage.

Companies that thoughtfully integrate geopolitical risk assessment into their disclosure strategy signal to investors that they're prepared for the complexities of modern global business. They demonstrate resilience, foresight, and sophisticated risk management capabilities that distinguish them in crowded markets.

The regulatory landscape will only become more demanding. The SEC's increased focus on geopolitical risks represents the beginning of a broader trend toward comprehensive risk disclosure that acknowledges our interconnected global economy. Early adopters of robust geopolitical risk frameworks will find themselves ahead of both regulatory requirements and investor expectations.

In a world where a single geopolitical event can trigger supply chain crises, market volatility, and operational disruptions across continents, your SEC filing becomes a testament to your leadership team's understanding of modern business realities. Make it count.