Rising global security tensions signal a new era in which geopolitical risk is actively shaping government priorities, market dynamics, investor behaviour, and capital allocation. Understanding these developments has become essential for investors seeking to navigate uncertainty and identify future opportunities.
Professional services firm Alvarez & Marsal (A&M) has released the fifth edition of the European Private Equity Value Creation Report, where they explore how ‘private equity firms are being forced to rethink how they create value as renewed geopolitical volatility, high entry valuations and prolonged exit timelines reshape the European dealmaking environment’.[1] Geopolitical volatility is already ranked among the top challenges for investors, cited as ‘the single biggest barrier to value creation and returns, forcing sponsors to rethink assumptions around timing, execution, and exit readiness’.[2]
In addition, the same report establishes that the resurgence of geopolitics necessitates recentering resilience at the core of an organisation’s investment strategy, as ‘geopolitical volatility has become a defining feature of the private equity environment this decade, with trade restrictions, conflict and supply chain disruption affecting dealmaking, investment theses and value creation in equal measure’.[3]
The report’s survey ranks geopolitical volatility as the single biggest challenge to value creation according to 62% of respondents, ahead of tariff volatility and inflation, both at 58%.[4]
The significance of this survey is manifest for the private equity sector: geopolitical volatility is rising both in its impact and in expected likelihood, making it a critical factor in how private equity firms drive and sustain value creation.
The fundamental question is whether the full extent of geopolitical risk exposure and the trend trajectory is truly understood, and what level of confidence private equity firms can place in the quality and accuracy of the assessments used to evaluate it.
Do private equity firms have sufficient transparency into the process through which geopolitical risk is evaluated? Are they empowered to understand and articulate how service providers or internal teams derive their findings and recommendations before they are presented to the decision-makers and boards?
The necessity to account for geopolitical volatility calls for a robust and transparent process for the evaluation of geopolitical risk and the production of trends forecasting that are both transparent and relevant to individual businesses.
This is underscored by Alvarez & Marsal’s report, which stresses that ‘as operational improvement takes a more central role in value creation, the ability to anticipate and manage exposure to these forces has become more important’.[5]
The ability to anticipate and manage geopolitical risk exposure also supports how private equity firms and portfolio companies implement sustainable growth strategies. It informs the decision-making process, leading to further adjustments in supply-chain strategy, diversification in portfolios and logistics, and operational resilience.
These measures will continue to absorb future disruptions that are likely in era characterised by diverse and overlapping challenges to the international order, where instability has become the new normal.
As private equity firms are rethinking growth, the report highlights that ‘the focus is moving from pure volume-based to more durable and higher-margin revenue streams, [reflecting] an environment of slower end-market demand caused by ongoing geopolitical volatility and macroeconomic uncertainty’.[6]
This is where private equity firms have an opportunity to recalibrate their approach to EBITDA evaluation, adopting an adjusted EBITDA framework that explicitly accounts for geopolitical risks and influences, contributing to more accurate evaluation to increase the negotiation power to adjust future growth plans and build resilience.
Furthermore, although geopolitical volatility is typically perceived as a risk, organisations that understand its potential impact, assess its likelihood, and anticipate emerging trends can turn uncertainty into opportunity.
By focusing on areas where geopolitical developments are most likely to influence performance, private equity firms will drive sustainable growth, enhance value creation, and strengthen the resilience of their portfolios.
FrontierResolve GPR is best positioned to help private equity firms address the challenges posed by geopolitical volatility. By applying a robust, transparent, and methodology-driven approach, FrontierResolve GPR works in partnership with private equity firms to understand the firm’s and their portfolios’ exposure to geopolitical risk, forecast medium and long-term trends, and implement tailored solutions. This approach delivers tangible value across portfolios and supports informed, strategic decision-making.
[1] “Operational Alpha: How Private Equity Is Building Value in a New Cycle May 2026.” A&M, May 2026.
[2] “Operational Alpha: How Private Equity Is Building Value in a New Cycle May 2026.” A&M, May 2026.
[3] “Operational Alpha”, p. 21.
[4] “Operational Alpha”, p. 21.
[5] “Operational Alpha”, p. 21.
[6] “Operational Alpha”, p. 19.
The views and opinions expressed herein are those of the author at the time of publication and are provided for general informational purposes only. They do not constitute financial, investment or legal advice and should not be relied upon as such. References to third-party views, opinions, or information are drawn from sources believed to be reliable and of high quality. However, such information has not been independently verified, and no representation or warranty is made as to its accuracy, completeness, or reliability.