Global Risks Report Highlights Geopolitical and Technological Risks

Global Risks Report Highlights Geopolitical and Technological Risks

Today’s business leaders face new threats but can find new opportunities in a changing global risk landscape.

The just-released 12th edition of the Global Risks Report, prepared by the World Economic Forum with the support of Marsh & McLennan Companies and others, points to the need for businesses to understand and plan for an array of risks that are emerging in a context of rising geopolitical tensions, deepening societal polarization, and rapid technological change. The report also explores interconnections among risks. Social instability was at the center of the risk web:

Social and Political Challenges

Across the globe, people are sending a clear message to political leaders: They feel let down and they want change. Voters in advanced economies have rejected the political establishment and the status quo — most notably in the UK Brexit vote and the US presidential election. Anti-establishment sentiment is also reverberating across the Eurozone, where populist movements are gaining momentum.

Citizens have also taken to the streets in large numbers. In France, strikers have disrupted fuel supplies. In Germany, policies to accommodate refugees have been a lightning rod for broader frustration. In countries such as Brazil and South Korea, corruption exposures have led to impeachment of their leaders. Societies are increasingly polarized, and the stress on established democratic norms is escalating.

Surges in social and political instability have the potential to spawn a range of disruptions to business activity, from civil disturbance and terrorist attacks to government policy reversals and regime change. As a corollary, companies may more easily find themselves on the wrong side of volatile social, political, and environmental issues.

The Fourth Industrial Revolution (4IR)

Technology will continue to play a vital role in promoting global prosperity, but the pace of innovation is also creating new risks.

As artificial intelligence (AI) applications and Internet of Things (IoT) devices are deployed to improve productivity or increase safety, new cyber exposures are created and need to be managed. AI and robotics have the potential to take jobs away from workers. At a time of significant unemployment and growing social instability among lower-income groups, companies may experience pressure to align automation strategies with what is deemed politically and publicly acceptable.

The AI field is also fraught with other complications — for example, new liabilities (from self-driving cars, drones, etc.) where legal precedent is embryonic at best. Development in risk governance for AI in parallel with its commercial deployment is critical to ensure that risk/reward tradeoffs are clear for businesses.

Implications for Business

To thrive in such challenging times, businesses need to think creatively about scenario planning, including second- and third-order consequences. Companies can then stress-test supply chain approaches and investment decisions while evaluating potential changes to business and risk management strategy. The pace and scope of technology deployment will also be another critical issue to get right, and may require an injection of new talent.

We live in a time of high risk, but also of great reward. Every challenge will need an innovative solution; while new policies may close some doors, they will inevitably open others. With a careful eye on emerging global risks, companies can thrive in this volatile environment.

Article written by:

John Drzik

President, Global Risk and Specialties at Marsh

John Drzik

More articles from Marsh

03 Nov 2017 Marsh
The Belt & Road (B&R) Initiative, a development strategy proposed by Chinese President Xi Jinping that focuses on connectivity and cooperation – with an investment of many billions in railway lines, pipelines, and ports, could provide a boost for international trade – and also for insurance. However, the opportunities that the B&R initiative brings also result in some risks and challenges. B&R will pass through diverse countries spanning Africa, Asia, and Europe, exposing participating companies to political, credit, and security risks. Numerous countries receiving Chinese financing already bear elevated debt levels and B&R will weaken their sovereign credit position further. The Fitch ratings agency warns that the creditworthiness of many countries along the B&R are rated as extremely low. This significantly raises the risks for Chinese banks that are financing parts of the project. Moreover, China’s growing regional influence will elevate geopolitical
The Belt & Road (B&R) Initiative, a development strategy proposed by Chinese President Xi Jinping that focuses on connectivity and cooperation – with an investment of many billions in railway lines, pipelines, and ports, could provide a boost for international trade – and also for insurance. However, the opportunities that the B&R initiative brings also result in some risks and challenges. B&R will pass through diverse countries spanning Africa, Asia, and Europe, exposing participating companies to political, credit, and security risks. Numerous countries receiving Chinese financing already bear elevated debt levels and B&R will weaken their sovereign credit position further. The Fitch ratings agency warns that the creditworthiness of many countries along the B&R are rated as extremely low. This significantly raises the risks for Chinese banks that are financing parts of the project. Moreover, China’s growing regional influence will elevate geopolitical
28 Aug 2017 Marsh
Despite being 80 percent more likely to be targeted by hackers than the rest of the world, cyber risk mitigation efforts in the Asia-Pacific region are generally weak.  This can be seen in the low levels of awareness and insufficient cybersecurity investments.  It is also reflected in the lower than necessary cyber insurance adoption rates in Asia. In this paper we begin by realigning the common misconceptions businesses have regarding cyber risk insurance. Then, we recommend a three-pronged approach, which details an action plan to demonstrate to organizations key considerations in moving towards a greater focus on cyber resilience: Effective endpoint security management. First putting in place best practices in cyber-defense, including effective endpoint security and IT infrastructure. As the first line of defense, it is important to continuously upgrade to smarter endpoint security. This can be achieved via threat intelligence to scale up the capabilities of
Despite being 80 percent more likely to be targeted by hackers than the rest of the world, cyber risk mitigation efforts in the Asia-Pacific region are generally weak.  This can be seen in the low levels of awareness and insufficient cybersecurity investments.  It is also reflected in the lower than necessary cyber insurance adoption rates in Asia. In this paper we begin by realigning the common misconceptions businesses have regarding cyber risk insurance. Then, we recommend a three-pronged approach, which details an action plan to demonstrate to organizations key considerations in moving towards a greater focus on cyber resilience: Effective endpoint security management. First putting in place best practices in cyber-defense, including effective endpoint security and IT infrastructure. As the first line of defense, it is important to continuously upgrade to smarter endpoint security. This can be achieved via threat intelligence to scale up the capabilities of
09 Jun 2017 Marsh
Cybercrime is becoming a greater risk in doing businesses in Asia-Pacific (APAC) as compared to the West. Rapidly growing connectivity and the accelerating pace of digital transformation expose the APAC region, and make it particularly vulnerable to cyber exploitation. Evidently, according to the 2017 edition of the Global Risks Report, cyber concern around the likelihood and impact of technological threats has sharpened among business executives in APAC, and cyberattacks are ranked among the top 5 risks of doing business in the region. To complicate matters further, the lack of transparency in the region renders weak cyber regulations and enforcements by authorities, as well as low cyber awareness and security investments among corporations. Historically, data breach notification laws have been lacking across the region, bringing forth one key insight – governments and policy-makers have yet to recognize the importance of transparency in the battle against cyberattacks. Moreov
Cybercrime is becoming a greater risk in doing businesses in Asia-Pacific (APAC) as compared to the West. Rapidly growing connectivity and the accelerating pace of digital transformation expose the APAC region, and make it particularly vulnerable to cyber exploitation. Evidently, according to the 2017 edition of the Global Risks Report, cyber concern around the likelihood and impact of technological threats has sharpened among business executives in APAC, and cyberattacks are ranked among the top 5 risks of doing business in the region. To complicate matters further, the lack of transparency in the region renders weak cyber regulations and enforcements by authorities, as well as low cyber awareness and security investments among corporations. Historically, data breach notification laws have been lacking across the region, bringing forth one key insight – governments and policy-makers have yet to recognize the importance of transparency in the battle against cyberattacks. Moreov