In recent years, regulation has evolved beyond its traditional role as a tool for protecting markets and citizens. Increasingly, it is being used as a strategic weapon in geopolitical disputes and economic rivalries. Governments are no longer relying solely on military or trade negotiations to influence their rivals, they are turning to regulatory warfare. The imposition of sanctions, trade restrictions, and compliance barriers has become a powerful instrument to weaken competitors, reshape supply chains, and shift global power balances (Farrell and Newman, 2019).
This shift raises urgent questions for risk professionals: Are organisations prepared for the moment when a change in regulation, rather than a market shift, renders their business model unviable overnight?
The Rise of Regulation as a Geopolitical Weapon
Historically, regulations were designed to ensure market stability, protect consumers, and foster fair competition (Vogel, 1996). However, in the 21st century, they are increasingly being applied with strategic intent, often targeting specific countries, industries, or technologies (Baldwin, 2020).
Recent examples include:
- Technology export controls on semiconductors imposed by the United States on China (U.S. Department of Commerce, 2023).
- Financial sanctions targeting Russian banks and individuals following the invasion of Ukraine (Council of the EU, 2022).
- Tariffs imposed by the United States on Indian exports in 2025, raising duties on steel, textiles, and auto parts by up to 50% (Reuters, 2025; Economic Times, 2025).
These measures are often justified on security or ethical grounds, yet they have significant economic consequences, particularly for companies caught in the crossfire.
Why This Matters for Risk Management
For multinational companies, the speed and unpredictability of regulatory changes have increased operational vulnerability. Traditional risk models often focus on market volatility, operational disruptions, or cyber incidents — but few anticipate sudden regulatory shocks that can cut off entire markets or supply chains.
This new reality requires businesses to:
- Integrate geopolitical intelligence into compliance monitoring (Manor, 2021).
- Map supply chains beyond tier one suppliers to understand potential exposure to sanctioned jurisdictions.
- Prepare “regulatory shock scenarios” alongside traditional disaster recovery and business continuity plans.
Without these measures, an organisation can find itself technically compliant today but completely shut out of its markets tomorrow.
Case Study: U.S. Tariffs on India as a Strategic Signal
In August 2025, the United States announced a steep tariff increase on Indian exports, affecting key industries such as steel, textiles, and automotive parts (Reuters, 2025). The move, officially justified on grounds of “market imbalances,” was widely interpreted as a broader strategic signal amid tensions over digital trade and India’s growing alignment with non-Western powers (Financial Times, 2025).
The impact was immediate: analysts predicted a potential 30% drop in India’s U.S.-bound exports, with GDP growth downgraded by up to 0.3% (Moody’s, 2025; Economic Times, 2025). For Indian enterprises, this underscored three realities:
- Export strategies must account for politically motivated tariffs.
- Diversification of trade partners is now a survival strategy, not a growth strategy.
- Policy risk is business risk; regulatory and geopolitical decisions abroad can directly undermine domestic industries.
For risk practitioners, the lesson is clear: even major economies are vulnerable to the weaponisation of trade policy, and businesses must factor this volatility into their resilience planning.
The “Shut Down Overnight” Scenario
Perhaps the most dangerous aspect of regulatory weaponisation is its immediacy. Sanctions and compliance rules can be activated within hours, leaving companies with stranded assets, frozen accounts, or invalidated contracts.
As the Council on Foreign Relations (2022) notes, the globalisation of financial markets means sanctions can cascade across borders instantly. For example, a compliance update in Washington can cause a bank in Mumbai or Singapore to block transactions within minutes.
This speed transforms regulation from a predictable framework into a potential shock event, one that organisations must now actively simulate and prepare for.
Recommendations for Risk Practitioners
To mitigate the impact of weaponised regulation, risk professionals should:
- Embed geopolitical risk assessments into the governance framework (BCBS, 2023).
- Establish regulatory horizon scanning functions to detect early signs of policy shifts.
- Build redundancy into supply chains and partnerships to ensure no single point of political vulnerability exists.
- Engage in cross-functional crisis exercises involving legal, compliance, procurement, and C-level leadership.
Conclusion: How Bazzi Consulting Can Help
In this new era of regulatory weaponisation, risk management is no longer just about compliance — it is about resilience. Organisations must move from reactive compliance to proactive anticipation, understanding that regulations are no longer neutral but can be designed to destabilise competitors.
Bazzi Consulting specialises in helping organisations anticipate, model, and mitigate the impact of sudden regulatory shifts. From building geopolitical risk frameworks to conducting “regulatory shock” simulations, our expertise ensures your organisation remains operational — even when the rules change overnight.
References
Baldwin, R. (2020) The Globotics Upheaval: Globalization, Robotics, and the Future of Work. Oxford: Oxford University Press.
BCBS (2023) Principles for Operational Resilience. Basel: Bank for International Settlements.
Council of the EU (2022) EU sanctions against Russia explained. Brussels: European Union.
Council on Foreign Relations (2022) Sanctions and the Global Economy. New York: CFR Press.
Economic Times (2025) Tariff shock: Indian auto parts and textiles hit by U.S. duties. 5 August.
Farrell, H. and Newman, A. (2019) ‘Weaponized interdependence: How global economic networks shape state coercion’, International Security, 44(1), pp. 42–79.
Financial Times (2025) Trump’s 50% tariffs threaten India’s growth strategy. 6 August.
Manor, I. (2021) The Digitalization of Public Diplomacy. Cham: Springer.
Moody’s (2025) India GDP growth downgraded amid U.S. tariff escalation. Investor Note, 7 August.
Reuters (2025) U.S. imposes 50% tariffs on Indian goods, citing market imbalances. 3 August.
U.S. Department of Commerce (2023) Bureau of Industry and Security export controls on advanced semiconductors. Washington D.C.: U.S. Government.
Vogel, D. (1996) Trading Up: Consumer and Environmental Regulation in a Global Economy. Cambridge, MA: Harvard University Press.
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