2026 financial risks: at a glance
- What do I need to know? As economic uncertainty is set to persist into 2026, cautious CFOs are preparing to take additional financial risk management into account.
- What does it mean for me? Preparing your finance function to anticipate and absorb additional shocks can protect your business from capital loss and financial instability.
- Why does it matter? Targeted financial risk management and maintaining stable, resilient cash inflows can support long-term growth and build investor and shareholder confidence.
Assessing financial risk has grown more complex in recent years, as both new and existing challenges test business resilience. A recent report from McKinsey found that 38% of CFOs claimed that managing financial risk took up most of their time.
Forward-thinking CFOs need to take strategic precautions to safeguard capital, so how can you prepare for evolving financial risk in the year ahead?
In this guide, you’ll discover the financial risks that could hold back your company’s success in 2026, with practical methods to mitigate each and protect your company’s cash.
What is financial risk?
Financial risk refers to the possibility of losing capital. This can take the form of a reduced balance sheet, limited cash flow, or failure to meet financial obligations.
CFOs need to consider market volatility, regulatory changes, and the impact of strategic missteps on the company’s finances. Strategic errors are an especially significant threat, as they can undermine long-term growth or, in the worst cases, threaten the viability of an SME (Small to Medium Enterprise).
Types of financial risk
Anticipating different forms of financial risk is essential for CFOs, as they aim to maintain their business’s financial resilience and support long-term stability.
Financial risks are typically categorised into four main groups:
- Market risk: fluctuations in stock prices, interest rates, and exchange rates.
- Credit risk: inability to repay loans or meet financial commitments.
- Liquidity risk: insufficient cash flow to meet payments due in the short term.
- Operational risk: losses occurring from internal processes such as human error, legal disputes, or supply chain disruptions.
Six key financial risks to prepare for in 2026
Below, you’ll find some of the financial risks that could impact your business in 2026, and how you can adapt to protect your cash.
1. Elevated asset valuations
Overestimating the value of your business assets can create serious financial risks for SMEs. If assets - or the business itself - are valued above their worth, a market correction can rapidly erode capital. This can lead to a sudden accumulation of debt.
There are two main types of valuation risk:
- Collateral risk: Using overvalued assets as collateral when borrowing or investing in new projects can give a false sense of financial security. If those assets need to be liquidated, the business could be left vulnerable and unable to fulfil financial obligations.
- Acquisition risk: Deals that appear affordable on paper can become financial strains if the value of the asset declines unexpectedly.
Accurate valuations can help safeguard capital, preserve reputation, and maintain investor confidence.
Verify asset values through expert assessments
To mitigate elevated valuations, CFOs can mandate independent assessments of all assets and the company as a whole.
Attaining multiple professional valuations can give businesses a clear picture of their sustainable worth.
2. Rising public debt and inflation
When public debt rises, the government can issue bonds to finance spending, sometimes offering higher interest rates to attract investors. Rising debt can increase borrowing costs across the economy, making loans and investments more expensive for businesses.
To service debt, the government may also make cuts or delay spending elsewhere. This can reduce demand from public-sector clients and indirectly impact revenue opportunities for businesses that rely on public investment.
Rising inflation and public debt can create challenges for SMEs, especially if CFOs must navigate higher taxes, weakened consumer spending, and increased operating costs as a consequence.
Fluctuating and uncertain prices can make budgeting particularly difficult for smaller businesses.
Building financial resilience amid rising debt and inflation
Stress-testing your budgets and cash flow forecasts against various interest rates, inflation, and demand scenarios can help your company to prepare for different outcomes. Using high-interest savings accounts can also help your business build cash reserves and protect their value against inflation.
3. Unpredictable shifts in investor behaviour
Investor behaviours can be unpredictable. And as a CFO, you’re responsible for navigating and mitigating the financial risks this can create.
Investors naturally aim to maximise returns, which can lead them to withdraw funding if they identify potential risks, lose confidence, or find a more attractive opportunity.
If an investor sells shares, stock prices can drop, shaking stakeholder confidence and making it more difficult and expensive to raise or replace capital. On the other hand, investor hype can temporarily inflate asset values.
And if investors deem your business or sector to be risky, they can demand higher yields on investments to compensate, increasing your cost of capital.
Build investor trust and safeguard capital
As a CFO, it’s crucial to carefully manage investor expectations through transparent communication. Stress-testing financial plans and diversifying funding sources can build resilience against sudden shifts in capital.
4. Geopolitical tensions and trade risk
Changes in global politics, such as conflicts and trade wars, can affect your cash flow and profitability as an SME. Especially if you’re a business that relies on imports and exports.
Outsourcing to overseas partners for buying, selling, manufacturing, and other services can create financial uncertainty for various reasons, including:
- changes in tariffs and taxes
- regulatory shifts in different markets
- currency fluctuations
- delayed shipments
- unavailable materials
- restricted access to certain geographic markets
Monitor geopolitical and trade risks
Keeping informed about geopolitical developments and regulatory changes, especially those relevant to your business, can help anticipate impact.
You can reduce these risks by developing contingency plans for supply chain and logistics disruptions. Additionally, building a strong reserve in high interest savings accounts can protect your cash local currencies dramatically shift in value.
5. AI as a cyber security risk
As technologies advance, businesses increasingly rely on automated tools for efficiency and critical operations. This can save time and reduce labour costs. But if these systems fail, are misused, or become compromised, your business can endure significant consequences.
New risks may arise because of growing adoption of AI in particular. These can include:
- Innovative attacks: such as using deepfakes and automated phishing, aimed at stealing money, data, or intellectual property.
- System malfunctions: severely interrupting daily operations and internal processes, impacting productivity and revenue.
- Breaches or misuse: damaging your SME’s reputation and relationship with customers, investors, and partners.
Strengthen cybersecurity processes against AI-related risks
Investing in cyber insurance, robust security protocols, and staff training can help prevent these issues from arising - protecting your operations, finances, and reputation.
6. Weak economic productivity
Weak economic productivity occurs when resources produce smaller outputs than the amount invested.
For SMEs, this can have a handful of negative effects. If the broader economy is inefficient, demand can decline while the cost of goods, services, and labour is rising.
These conditions can cause slow revenue inflows, complicate effective cash flow management, and make strategic planning more challenging. SMEs can also face disadvantages against international competitors operating in more efficient economies.
Invest in internal productivity against economic downturns
To help offset these effects, CFOs should focus on strengthening internal productivity through automated tools and reviewing workforce efficiency to enhance output and support cash flow stability during times of weak economic performance.
Safeguard your capital against financial risks in 2026
Mitigating financial risks for the year ahead will be challenging for CFOs, but not impossible. Implementing strategic risk management and contingency plans, stress-testing your finances, and monitoring relevant markets are worthwhile investments to protect your business.
Diversifying your revenue streams, funding sources, and customer base helps to stabilise capital and maintain a consistent cash flow - even in an uncertain economy.
With economic volatility becoming increasingly commonplace, it is more important than ever for forward-thinking CFOs to build cash reserves to fall back on if these risks materialise.
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