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EY’s 2025 Geostrategic Outlook: Key Developments Shaping The Global Landscape

As we step into 2025, the geopolitical landscape is brimming with uncertainty, marked by political, economic, and demographic shifts that will impact businesses worldwide. According to the latest Geostrategic Outlook from EY-Parthenon, 2025 will see pivotal geopolitical developments that companies must understand to navigate the complexities ahead. The report identifies the top 10 geostrategic developments set to shape global organizations’ strategies, cutting across industries and regions. These developments are divided into three key areas: transitions in political dynamics, evolving economic competition, and intensifying geopolitical rivalries.

1. Populist Policy Influences: The Rise Of Populism And Protectionism

Populism continues to grow across the globe, driving governments toward protectionist measures. Expect tighter immigration policies, more significant trade barriers, and increased pressure on environmental regulations as political leaders aim to cater to populist sentiments.

2. Taxation conundrums: Taxation Strategies In A Post-Election Era

With new governments taking power, fiscal strategies will evolve to address national debt concerns. This includes potential hikes in corporate taxes, capital gains taxes, and taxes on high-income individuals, pushing businesses to reassess their tax structures.

3.  Demographic divides: Ageing Populations And Migration

Demographic shifts, especially the aging population in developed nations and the migration patterns to and from these regions will continue to alter political dynamics on both the national and international stages, creating tension and division in policies.

4. De-risking and dependencies 

As countries face growing economic risks, more governments will focus on reducing dependencies on foreign trade and supply chains, fostering a more insular economic environment. This shift will affect the interrelations between states and private enterprises, influencing business strategies.

5. Digital sovereignty

Digital technology’s importance will grow in the coming years, with countries taking a firmer stance on controlling their digital infrastructure. Expect more stringent regulations and policies to safeguard data and protect national interests in the virtual world.

6. Climate and competition

In 2025, climate policies will be increasingly driven by a mix of economic, geopolitical, and price factors, as governments and businesses battle over resources and opportunities in the evolving green economy.

7. New geo-energy dynamics

Energy transition policies will continue to evolve, influencing global geo-energy balances. Uncertainty surrounding these shifts could determine how quickly the world transitions to sustainable energy and which countries and companies will lead the way.

8. Emerging market integration: A Complex Challenge

Emerging markets are under pressure to enhance their influence within global governance structures, while also navigating the rise of alternative multilateral institutions. This complex global environment demands careful management of international relations and economic partnerships.

9. Wars and conflicts

With rising geopolitical tensions, the possibility of new conflicts—both military and cyber—becomes ever more likely. States and non-state actors alike are preparing for this escalation, which could destabilize regional and global security.

10. Astro-politics and the space economy: The Battle For Space

The competition for space resources and technology will intensify in 2025. More nations are set to join the space race, seeking to secure technological advancements and extract valuable resources in this new frontier.

Navigating Political Risk: A CEO’s Imperative

George Papadimitriou, CEO of EY Greece, emphasizes the importance of resilience in today’s turbulent geopolitical climate. “In an interconnected world, businesses cannot afford to ignore the implications of global instability. Those who successfully integrate geostrategic analysis into their strategies will be the ones who thrive.”

Geopolitical risks are now a pivotal element of business transformation. According to joint research from EY and the University of Oxford’s Saïd Business School, 96% of organizational transformations encounter at least one “turning point,” with almost half of these being driven by external shocks such as political instability. This growing unpredictability, especially from geopolitical tensions, underscores the need for CEOs to have full visibility of their exposure to political risks. Yet, according to the EY-Parthenon CEO Outlook, only 30% of CEOs possess such insights, leaving their companies vulnerable in an increasingly uncertain environment.

The 2025 Geostrategic Outlook provides critical insights for executives, helping them navigate complex, interconnected geopolitical dynamics while also addressing broader forces like technology, sustainability, and global macroeconomics. This report aims to equip business leaders with the tools they need to make informed, strategic decisions as they confront the future.

About the Geostrategic Outlook

The Geostrategic Outlook is an annual report by EY-Parthenon, offering a deep dive into the geopolitical risks that will shape the business landscape in the year ahead. The analysis is based on a comprehensive horizon-scanning exercise, combined with insights from global geopolitical risk professionals. This outlook helps businesses understand the potential disruptions ahead and prepares them to implement strategies that can mitigate these risks effectively.

By focusing on high-probability and high-impact geopolitical developments, this report is an essential tool for any executive looking to future-proof their organization amidst ongoing global uncertainty.

ECB Moves to Ease Rules for Smaller Banks Without Weakening Supervision

The European Central Bank is preparing a significant broadening of proportionality in banking supervision, a move that could bring roughly 150 additional smaller institutions into a lighter regulatory framework, according to ECB Executive Board member Frank Elderson.

In a post on the ECB’s supervision blog, Elderson, who also serves as vice-chair of the Supervisory Board, said the goal is to reduce the regulatory burden on small and non-complex institutions while preserving the safeguards that support financial stability.

A More Flexible Approach To Supervision

Rather than creating a separate rulebook for smaller lenders, the ECB’s proposals would expand the existing framework for small and non-complex institutions, or SNCIs, by broadening eligibility and easing the frequency and intensity of certain supervisory tasks.

Elderson argued that Europe’s varied banking sector is a strategic strength. Smaller, locally focused banks, he said, play a critical role in financing households and small and medium-sized enterprises, which in turn supports innovation, employment and investment across the region.

“These institutions play an important role in financing households and small and medium-sized enterprises, helping innovative ideas become successful products and supporting jobs and investment across the region,” Elderson wrote.

He added that a banking system combining different business models, sizes and areas of expertise is better positioned to meet the financing needs of the European economy and, by extension, support competitiveness.

Why Proportionality Matters

The ECB’s approach rests on a simple principle: regulatory requirements should be calibrated to a bank’s size, complexity and risk profile.

At the same time, Elderson cautioned that smaller banks are not insulated from the pressures facing the wider financial system. He pointed to geopolitical risk, cyber resilience in the era of advanced artificial intelligence, digitalisation and climate- and nature-related risks.

“Depositors in smaller banks should be just as confident that their savings are safe and their bank is well managed, resilient and subject to robust risk management standards as those in larger institutions,” he wrote.

The central bank believes a more targeted framework would allow smaller lenders to devote more resources to the risks that matter most, while trimming compliance work that adds cost without materially improving resilience.

A Wider Definition Of Small Banks

The most consequential proposal would broaden the definition of what qualifies as a small bank.

Today, the SNCI framework covers 75% of all less significant institutions under European banking supervision, representing more than 1,400 entities as of December 2025.

Under the ECB’s proposal, national authorities would be able to lift the current €5 billion total-assets threshold for SNCI status to as much as €10 billion, depending on the size and structure of domestic banking sectors.

The ECB also wants the definition of “non-complex” to better reflect how banks operate in practice. Elderson noted that some institutions, especially in smaller member states, fail to qualify as SNCIs because of technical features in their recovery and resolution arrangements, even when they are not complex from a resolution standpoint.

Taken together, the changes could result in as many as 85% of less significant institutions being classified as SNCIs, bringing about 150 additional banks into the lighter framework.

The ECB also wants the SNCI label to be used more consistently in future European banking legislation, with new and amended rules spelling out more clearly how they apply to smaller and non-complex institutions.

Less Frequent Supervisory Reviews

The changes would not stop at classification. The ECB is also proposing a more selective approach to supervision itself.

The Supervisory Review and Evaluation Process, or SREP, could be carried out less frequently for some institutions. Elderson said certain banks might go two to three years without a full SREP if their risk profile justifies that approach.

That flexibility would remain subject to supervisory judgment, meaning banks could still face more frequent scrutiny if their risk warrants it.

“Where risks are low, some supervisory assessments will in practice be carried out even less frequently, reducing the burden on banks without undermining supervisory effectiveness,” Elderson wrote.

The ECB is also seeking to reduce the burden of stress testing. Bottom-up stress tests, in which banks run their own projections and submit them to supervisors, would be used only selectively for SNCIs. Supervisors would rely more heavily on top-down exercises, with projections carried out centrally.

That shift could meaningfully reduce the workload for nearly 1,000 SNCIs that are still subject to bottom-up stress tests.

Reporting Could Be Cut Dramatically

Reporting is another area targeted for simplification.

The ECB said its systems have already been adapted to support a materiality threshold for reporting resubmissions once the relevant legislative changes are in place.

A new SNCI category is also set to be introduced into the ECB’s FINREP regulation from 2027, beginning with a public consultation.

Under the proposed revisions, the volume of financial reporting required from SNCIs could fall from around 13,500 data points to roughly 700.

Updates to the European Banking Authority’s technical standards on supervisory reporting are also expected to remove redundant templates, eliminate overlaps and exempt SNCIs from certain reporting requirements.

More Flexibility On Governance

The ECB is also pushing for a more proportionate approach to governance requirements.

Supervisors would make greater use of existing flexibility to reflect a bank’s risk profile and operational complexity.

That could allow certain committees to be merged, including nomination and remuneration committees, while functions such as risk management and compliance could also be combined where appropriate.

The proposals would also create more room for flexibility around pay rules, including possible exemptions from requirements to defer variable remuneration or pay it in financial instruments.

Periodic independent reviews of remuneration policies could also be outsourced and applied in line with the sophistication of a bank’s internal stress-testing framework.

Why Smaller Markets Stand To Benefit

The proposals may be especially relevant to smaller European banking markets, even though the ECB has not identified which national authorities would choose to raise the €5 billion threshold.

Cyprus, for example, has a relatively small banking market and its domestic institutions fall under the European banking supervision framework. Any decision to apply the higher SNCI threshold would therefore depend on the applicable rules and supervisory assessment.

Elderson was explicit that the changes should not be read as a weakening of core safeguards.

“Proportionality should not be mistaken for reducing prudential standards for smaller banks,” he wrote. “The aim is not to lower standards, but to achieve them in a more efficient and proportionate manner.”

The ECB also said any simpler regime for smaller banks must be matched by a credible, flexible and efficient crisis management framework.

In Elderson’s view, trimming administrative overhead would free up scarce resources for risk management, customer service, investment in competitiveness and operational efficiency.

“By reducing undue complexity and the administrative burden for small and non-complex banks, these measures can support the competitiveness of Europe’s diverse banking sector, without compromising resilience,” he wrote.

What Comes Next

The ECB is preparing to implement the simplification measures within its authority. It will also work with European institutions on changes that require action beyond the central bank, including initiatives under development through the European Banking Authority.

For Elderson, the proposals are part of a broader push to streamline European banking supervision, not just for smaller institutions but across the system as a whole.

“Our goal is clear: to make our supervision more efficient, more effective and more risk-based, while continuing to preserve banks’ resilience,” he wrote.

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