2020: economic stress will amplify fractures in global stability

Published on Thu, 09/01/2020 - 10:30

Companies should think strategically, not tactically, advises Nick Allan, CEO of Control Risks

Every year Control Risks forecasts the principal risks that will affect business in the year ahead. What is striking in 2020 is that the risks remain eerily reminiscent of those we discussed in 2019 - only more acute, with greater impact, and often interlinked.

Election year for Trump

Despite some retrenchment, the US remains the major global economic and political force. In an election year, President Donald Trump will want to have some foreign affairs achievements to point to, particularly around his confrontation with China. US rivals will look to exploit the distraction of an election to push boundaries further and cement advantages.

Although the current US administration is significantly less internationalist, at the presidential level it is characterised by a direct use of power and leverage. Sanctions are a principal tool of coercive power, and as with Turkey in October 2019, these can appear and disappear with startling rapidity, but business can be in no doubt that compliance is mandatory.

The strategic retrenchment of the US has turned from a drift to a direction. States and populations wait to see what will fill the gap, and there is no shortage of powers looking to have an impact on what comes next.

Businesses facing growing activism

For business, the effects of the global financial crisis that broke in 2008 are still working through national political systems, with sometimes alarming effects. Growing inequality and a lack of social mobility fuel popular discontent and populism. Not restricted to politics, companies also find themselves subject to direct action at AGMs, outside facilities, or through social media campaigns. Activism has acquired new power and influence.

Protests - many violent - were a key feature of 2019, and businesses are affected by the political upheaval. Politicians are increasingly responding with short-term measures to quell discontent and buy time. Companies are trying to anticipate, react and rebuild their responses and are caught between listening to and supporting workforces and risking being caught up in national disputes. Technology ensures these issues aren't local for long, and companies tread a delicate path between stakeholders.

Technology shaping risk

Technology is also shaping the way companies experience and respond to risk. Like all clichés, data being the "new oil" or there being "too much data" rest on truths. Data and technology may be the bedrock of the new digital economy, but they are also a risk - a risk transmission mechanism, along with keys to opportunity and success.

Simultaneously, nation states know technology can shape political discourse and project power. Companies are enveloped in regulations and obligations and - as with political protests - can find themselves caught between demands of the state and respecting privacy. This is a trend, and as companies wrestle with insider threats and monitoring them, governments wish to co-opt or pressure them for their own ends.

2020: economic stress to amplify fractures in global stability

Control Risks expects tougher challenges in 2020 than we have seen before. Geopolitics often plays out in the shadows of the cyber sphere, and we expect to see large-scale cyber confrontation between powers, and business may be caught in the crosshairs. This will be more severe and more impactful than anything seen before.

The security, compliance and resilience skills business has learned over the past year will be tested further. With so many risks on the radar it is unsurprising that companies may be tempted to think tactically rather than strategically. This is a mistake. As geopolitics and economic policy become more tactical, the need for strategic vision is greater than ever. The past teaches us that political risk never gets easier to manage in an economic downturn, and economic stress will amplify current fractures in global stability.

Despite a somewhat gloomy outlook on several fronts, many clients remain set for growth in the months ahead. While regulations, trade barriers, sanctions regimes and cyber threats will hinder international business, we believe that conflict will be kept largely to these domains. The frameworks and structures that served as a reference point over the past few decades have fallen away, but business continues to innovate and drive prosperity in all corners of the globe. Indeed, in many areas companies are often responding faster than governments to meet these challenges.

In 2020, it is anticipation, agility and the ability to pick through tactical obstacles that will be critical.

Nick Allan is CEO of Control Risks. Click here to visit Control Risks' RiskMap 2020 report and analysis.