Last week’s siege by a gunman on a cafe in Sydney, Australia came as a shock to the world and underscored the fact that even the farthest corners of the globe may not be immune from political risk. And as President Barack Obama authorized further sanctions on Russia last week and looks to open a more friendly relationship with Cuba, the importance of both political and geopolitical risk gained further amplitude, raising their profile as key issues for the investment community to consider in 2015.

“For the better part of this year, most U.S. investors were focused more on the U.S. economy and the Federal Reserve and the interplay between those two, so because of that more inward looking focus, many correspondingly have largely ignored geopolitical risk,” said Michael Cuggino, President and Portfolio Manager of the Permanent Portfolio Family of Funds. “Whether it’s Russia, or the political risk in the Middle East and even in Asia with issues like what’s happening in the South China Sea, investors may have overlooked the risks they represent.”

But now, even as emerging market valuations look attractive, geopolitical risk is a major factor. Here are some views on how investment professionals see that risk panning out in 2015:

Tom Elliott, devere Group:
The increased threat of geopolitical risk will likely translate to increased volatility in the global markets, which is why Tom Elliott, international investment strategist for devere Group in London, advocates a defensive stance to counter it.

“I am favoring developed over emerging stock markets for the beginning of 2015 and sectors that are inherently defensive, like pharmaceuticals, food, retail and other sectors that stand to benefit from lower oil prices,” he said.

His biggest concern going into the new year is Russia, where a fresh round of sanctions could result in fresh rhetoric from president Vladimir Putin, which in turn would have repercussions for the rest of Europe. However, Elliott is also anticipating increased political risk from unexpected quarters, namely the U.K., as voters and investors come to grips with a new political landscape triggered by two nationalist parties that are challenging the traditional status quo enjoyed for decades by the Conservative and Labour parties, and the general elections next spring may well result in either a minority government that seeks allies on a policy-by-policy basis, or another coalition government, neither of which, Elliott said, promise stability.

“People take the threat of political risk in the U.K. too lightly and so it could come as quite an unexpected surprise to many investors,” Elliott said.

Eric Schoenstein, Co-Portfolio Manager of the Jensen Quality Growth Fund

Gepolitical risk has always existed, of course, and even at the beginning of 2014, said Eric Schoenstein, co-portfolio manager of the Jensen Quality Growth Fund, there were issues investors should have perhaps been more concerned about, namely Syria and Ukraine.

“They didn’t really slow the markets down, though, and I’d say it’s suddenly, only in the last three months or so, that we have much more volatility as a function of geopolitical risk,” he said. “Global political uncertainty is also more of an issue now because it’s likely that there will be an interest rate hike in 2015 and without that underlying component or support from the Fed, investors have to worry more about geopolitical risk.”

But for the high conviction, actively managed fund that Schoenstein is responsible for, the market volatility that geopolitical risk creates can also throw up some very good investment opportunities.

“We obviously don’t like geopolitical unrest and we don’t want to see people getting hurt but volatility tends to benefit managers like us as it it uncovers risk and allows us to consider which kinds of companies will survive or thrive in riskier circumstance. This can then lead to different types of investments than when risk isn’t present.”

Larry Elkin, President, Palisades Hudson Financial Planning Group

Larry Elkin, president of Palisades Hudson Financial Planning Group, prefers to think of geopolitical risk as geopolitical opportunity.

The current instabilities in the market as a result of political uncertainty do create investment opportunities, but Elkin, who’s firm has just released a new book, “Looking Ahead: Life, Family, Wealth and Business After 55”, believes it’s important to stay focused on the future, since “it’s been proven before that periods of deep uncertainty and crises are followed by deep, transformative change.”

After Russia defaulted on its external debt in 1998, for example, the country experienced a period of strong growth, Elkin said, and in the decade following the 1997 Asian crisis, economies in that region did very well.

“If you are shopping at the moment, you will find assets at a discount, but in my view, it would be better to invest in places where the rule of law prevails and where there’s transparency,” he said. “What happens to the Russian ruble this month or next will pass – but what counts is transformative, lasting change and hopefully, this more destructive period will lead to societies that are more constructive and where there’ll be better opportunities for all.”