The macroeconomic and markets environment has rarely been as unpredictable as it is today. Geopolitical and trade tensions are taking centre stage again, creating ripple effects across sectors and markets. Market volatility is on the rise with even short-term moves having the potential to significantly impact investment decisions or business profitability.
The latest annual whitepaper, titled ‘2025 corporate risk management outlook: steering through global shifts and policy risks’, provides corporate leaders with insights to shape their financial risk management strategies and help them make more informed decisions to mitigate potential threats. It dives into the key drivers of uncertainty and the potential implications for corporates to help them navigate the complex risk landscape, strengthen financial resilience, and drive business growth in a rapidly changing world.
BNP Paribas set out the following key themes to help finance leaders steer through the evolving landscape in 2025:
Navigating macro-economic unpredictability
- The global economy faces significant challenges in 2025 due to policy risks and uncertainties.
- US administration decisions and reactions across the globe will have a substantial impact on business and market outlooks worldwide.
- High trade tariffs, tight immigration policy, deregulation, and tax cuts are likely to raise US inflation, slow economic growth, and lead to a strong dollar.
- Central banks outside the US are poised to ease their policies, leading to monetary policy divergence and further reinforcing the strength of the US dollar.
Adapting to changes in trade policies
- Trade policy impacts vary across geographies and sectors, with corporates looking to build resilience in a more uncertain world.
- Tariffs and uncertainty are likely to have a larger GDP impact for integrated economies across Eastern Europe and APAC.
- Sectors like metals, tech hardware and semiconductors as well as automotive are exposed to direct tariffs due to their political sensitivity.
- Beverages, luxury, US retail, med-tech and US utilities may also be caught in the crossfire.
- Tariff impacts on individual companies will depend on export reliance, manufacturing footprint, production flexibility, and ability to pass on price increases to customers relative to their industry peers.
Staying ahead of global shifts and policy uncertainty
- Megatrends like digitalisation and energy transition will drive 2025 investment needs, but uncertainty in fiscal, macro, and business outlooks poses new challenges for treasurers facing refinancing risks. Corporates should consider managing debt sensitivity on a forward-looking basis, and account for rising short-term risks.
- Policy uncertainty will challenge revenue and cash flow forecasts amid high FX volatility and a strong USD. Treasurers will need to build resilience against unexpected business and market changes, for instance by increasing optionality in FX hedging portfolios, and embracing digitalisation (like BNP Paribas’ Kantox suite of solutions) to mitigate cash flow uncertainty.
- M&A volumes are expected to pick up in 2025, with EMEA corporates looking to tap resilient US growth, while US buyers find EMEA valuations attractive. However, regulatory uncertainty creates hurdles for M&A completion, while cross-border M&A faces stronger risks of political interference, reinforcing the need to anticipate market exposures of M&A situations and design resilient hedging strategies given the market backdrop.
- Inflation is here to stay and remains vulnerable to upside risks such as policy uncertainty, underlining the benefits of a proactive approach to contractual inflation exposure assessment and mitigation.
- Corporates engaged on their low-carbon transition will face divergent climate policies worldwide, as well as uncertainties on political and fiscal support, supporting long-term risk management policies to mitigate project risks as well as new carbon and metal exposures.
Anticipating ‘what could go wrong’
- In a potential grey swan scenario, the Fed could start hiking rates again, which would disrupt forecasts and create a tougher environment for corporate treasurers.
- This scenario would strengthen the US dollar, tighten financial conditions, and challenge equity valuations.
Overall, policy unpredictability makes 2025 a challenging year for the global economy, with above-average volatility. Corporates may want to be proactive in anticipating the impact of global shifts on their financial risk profile and design strategies to shield their businesses from increased uncertainty. In other words, control the controllables.
To find out more about the latest whitepaper, please contact your local BNP Paribas representative.
