The Strait of Hormuz: When Geopolitical Risk Becomes Enterprise Risk
Published on Sunday, August 9, 2026
Companies have traditionally viewed geopolitical risk as an issue for governments and international-affairs specialists. Events in 2026 have demonstrated, however, that a geopolitical flashpoint can quickly become a matter of cash flow, production and board-level governance.
The Strait of Hormuz provides a particularly relevant example. This strategic maritime corridor is critical to global energy flows. Continued tensions between the United States and Iran in 2026 increased risks to shipping and energy flows, with potential consequences extending well beyond the Middle East.
For businesses, the exposure is not limited to the price of oil. A maritime disruption can simultaneously increase transportation costs, extend lead times, raise working-capital requirements and compress margins. Suppliers may themselves be exposed, creating a cascading effect that traditional risk management systems may fail to identify.
This is precisely where Enerprise Risk Management provides strategic value. The board’s question should not simply be: “What happens if the Strait is closed?” It should be: “How well could we continue operating if several consequences occurred simultaneously?”
Effective analysis therefore needs to move beyond a single scenario. What happens if energy costs rise by 30%, delivery times double, and a critical supplier temporarily suspends operations? What would be the impact on liquidity, contractual commitments, customers and earnings?
The central lesson from 2026 is clear: geopolitical risk becomes enterprise risk when it crosses the boundaries of the organization.
For boards of directors, the priority is therefore not to predict the next geopolitical crisis. It is to ensure that the organization has sufficient visibility, scenario analysis, financial flexibility and operational resilience to absorb its consequences.
Depending on its business sector and the nature of its activities, your organization may be impacted, directly or indirectly, by this global risk over the coming years.
Whether you are a director, an executive or a manager, you may be wondering if your company is exposed to this global risk or other potential events. And if so, are you and your organization ready to face these challenges?
Should you need advice on the appropriate risk governance and enterprise risk management approach for your organization, please contact us.
Baldwin Global is an independent advisory group offering professional services, education and training in risk governance and enterprise risk management. We help our clients’ boards of directors and management teams attain their objectives by embedding sound risk oversight and management practices into their decision-making process to have a significant positive impact on their business.
Photo by Chris Johnson