Introduction to Geopolitics for CFA Level I

What this chapter covers

Introduction to Geopolitics: topics in the order to study them

1. 1Geopolitics: Meaning and Key ConceptsEvery later topic uses these definitions, so fix the vocabulary first.
2. 2Actors and Their Objectives in GeopoliticsYou need to know who acts and what each actor wants before studying how they act.
3. 3Tools of Geopolitics: National Security, Economic and FinancialTools are the means actors use to pursue their objectives, so they follow naturally after actors.
4. 4Cooperation vs Competition and Globalization TrendsThis shows the overall pattern that results when actors use their tools, and sets the backdrop for risk.
5. 5Geopolitical Risk: Types and AssessmentRisk classification builds on the actors, tools and trends you have already covered.
6. 6Impact of Geopolitical Risk on InvestmentsThis is the application topic, so study it last when you can link every earlier idea to markets.

How to prepare Introduction to Geopolitics

1. Read the learning outcomes first and turn each into a question you must be able to answer in one or two sentences.
2. Build a one-page map: actors, their objectives, the tools (security, economic, financial), and the resulting cooperation or competition.
3. Write your own short definitions for each key term and check them against the curriculum wording. Precise terms help you eliminate wrong options.
4. For risk, make a list of the risk types and assessment factors, and attach one example scenario to each in your own words.
5. For investment impact, practise tracing a chain: event, then channel (trade, supply chain, currency, rates, sentiment), then asset class effect.
6. Do standalone practice questions at about 90 seconds each. After each, state why the two rejected options are wrong.
7. Revisit the map after a few days and rebuild it from memory on your phone notes.

Common mistakes in Introduction to Geopolitics

• Answering from current news instead of the curriculum framework.

  Fix: Anchor every answer to the curriculum's definitions and classification, and ignore real-world views that the stem does not state.

• Mixing up actors, tools and objectives.

  Fix: Ask three separate questions: who is acting, what do they want, and what means are they using.

• Confusing the types of geopolitical risk or merging them into one.

  Fix: Learn each type's definition and pick the one the stem emphasizes most.

• Assuming geopolitical events always hurt all assets.

  Fix: Think by channel and asset class. Some sectors, currencies or assets may gain while others fall.

• Treating likelihood and impact as the same thing in risk assessment.

  Fix: Judge them separately: an unlikely event can still have a large impact, and vice versa.

• Skipping this chapter because it looks light.

  Fix: Give it a few focused sessions. Because it is new, it is likely to feature in questions, and the marks are easy to secure.

Last-day revision: Introduction to Geopolitics

• ✓Geopolitics links power, geography and politics to economic and market outcomes.
• ✓Actors include states and non-state actors; know each actor's main objectives.
• ✓Tools fall into three groups: national security, economic and financial.
• ✓Economic tools include measures such as tariffs and trade restrictions; financial tools work through access to capital and payment systems.
• ✓Cooperation and competition coexist; do not assume the world is only one or the other.
• ✓Globalization trends can strengthen or weaken over time; know the drivers in the curriculum.
• ✓Geopolitical risk must be classified by type before it is assessed.
• ✓Assessment looks at both the likelihood of an event and its possible impact.
• ✓Impact reaches investments through channels such as trade, supply chains, currencies, rates and sentiment.
• ✓Effects differ by asset class, sector and country, so avoid one-size-fits-all answers.
• ✓Diversification and scenario analysis are core ways to manage geopolitical risk.
• ✓Choose the option that fits the curriculum logic, not a news headline.

Introduction to Geopolitics practice questions

• A government that mainly seeks to protect its territory, its citizens, and its political system from external threats is most likely pursuin…
• Which of the following developments is most likely to be associated with a trend of deglobalization?
• Compared with a bilateral agreement, a multilateral arrangement among many countries is most likely to:
• Which of the following non-state actors is most likely to influence geopolitical outcomes primarily through control of cross-border capital …
• A country joins a regional bloc whose members share a common external tariff and allow free movement of goods within the bloc. This action i…
• In the curriculum's framework, which actor is most likely to be classified as a non-state actor?
• In the CFA Level I geopolitics framework, which of the following is the most accurate description of a nation-state actor?
• An analyst argues that a major regional power's refusal to join a multilateral trade pact, in favor of bilateral deals with individual partn…

Introduction to Geopolitics in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

• FRM Part IIGlobal Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk)