Systemic financial risks in an era of geopolitical tensions, climate change, and technological disruptions: Predictive analytics, stress testing and crisis response strategies

Systemic financial risks have become increasingly complex and unpredictable due to the interplay of geopolitical tensions, climate change, and rapid technological disruptions. Financial markets and institutions face heightened uncertainty, driven by shifting global power dynamics, trade conflicts, and regulatory changes that impact economic stability. Concurrently, climate-related risks, including extreme weather events, resource depletion, and the transition to sustainable energy, pose long-term threats to financial assets, investment portfolios, and economic resilience. Technological disruptions, particularly those stemming from artificial intelligence, cybersecurity vulnerabilities, and digital financial innovations, further complicate risk management by introducing new vulnerabilities and systemic contagion pathways. In this evolving risk landscape, predictive analytics and stress testing have emerged as essential tools for identifying vulnerabilities, quantifying financial shocks, and developing proactive mitigation strategies. By leveraging machine learning models, big data analysis, and scenario-based forecasting, financial institutions can assess the potential impact of geopolitical instability, environmental shocks, and technological disruptions on financial systems. Additionally, stress testing frameworks enable regulators and policymakers to evaluate the resilience of financial institutions under extreme conditions, ensuring adequate capital buffers and liquidity measures. This research explores how predictive analytics, stress testing, and crisis response strategies can be effectively integrated to enhance financial stability in an era of escalating global uncertainties. It examines case studies of past financial crises, emerging threats, and best practices for mitigating systemic risks. By providing a comprehensive approach to financial risk management, this study contributes to the development of adaptive strategies that safeguard economic stability amid an increasingly volatile global environment.