The geopolitics of the COVID-19 pandemic

By

Neal Croft, Global Client Relationship Director, Willis Towers Watson

and

Lucy Stanbrough, Research Manager, Emerging Risks, Willis Research Network, Willis Towers Watson

Trade disputes

The on-off trade disputes between the US and China, which created uncertainty for the global economy in the last few years, look likely to continue unabated.

There are also new trade issues occasioned by the COVID-19 crisis. For instance, governments around the world have banned the export of health care equipment and medicines, disrupting the global supply chains that matter most in the crisis.

Tech wars

Aside from Brexit, perhaps the world's most dramatic trade negotiations have been related to the so-called 'tech war' between the US and China. Headline issues in the tech war have centred around the concerns of the US administration regarding the Chinese telecoms giant Huawei. This has led to other countries finding themselves in a delicate position between the US and China.

Cyber risks

As employees began to work from home in compliance with the lockdowns around the world, this exposed their organisations to increased cyber risks and breaches - because data normally accessed in the secured office environment is now taken into homes. Organisations need to improve their cyber and business resilience to continue to operate in this way and maintain their reputations.

Economic outlook

A debt crisis among emerging markets is growing as developing countries face a wave of government bankruptcies, due to the global economy going into shutdown. More than 100 countries have sought financial assistance from the International Monetary Fund, including large emerging markets such as South Africa.

Populism

The COVID-19 pandemic threatens to spark a new wave of Euroscepticism and populist politics. For instance, in Italy, the first epicentre of the pandemic in Europe, a poll found that 88% of its people felt the EU had failed them - which could provide fertile ground for anti-Europe campaigns.

Climate action

Despite calls by many for a green recovery from the coronavirus crisis, there is also a risk that local and global efforts to tackle climate change are flagging, as other risks seem to be taking priority.

Yet, proactive climate action will put organisations at a competitive advantage given pressures from regulators (Task Force Climate-related Financial Disclosures guidelines could become mandatory for many by 2022), investors, consumers, and employees.

Operating in the post-crisis new normal

If organisations can pre-empt the changes in the way businesses and the economy will operate in the ensuing six to 12 months, they can move from reacting into strategic planning that will help them to gain competitive advantage in the new normal and stay resilient.

Remember that it isn't all negatives. The COVID-19 experience may bring opportunities such as the opportunity to evaluate different and more cost-effective ways of working, build a more resilient society, develop larger domestic markets and establish more reliable supply chains.

The full Airmic survey report, Top risks and megatrends 2020, can be downloaded here.