Prepare to meet global risks head on

In a world in which so many factors can affect global stability, the World Economic Forum (WEF) has picked out the environment, cyber, economics and geopolitics as the four key areas to watch in its The Global Risks Report 2018.

Now in its 13^th edition, the report, which draws on expert and global decision-maker views to highlight the most significant long-term risks globally, this year found that the “structural and interconnected nature of risks in 2018” threatened the setup that economies, international relations and societies were based upon.

Though the study acknowledged that an upbeat economic outlook existed, it said that this forecast offered leaders the chance to deal with “systemic fragility affecting societies, economies, international relations and the environment”. In terms of the World Economic Forum Global Risks Perception Survey 2017–2018, included in the report, environmental threats dominated the study, with these risks considered highly probable and impactful. The cyber issue was becoming more important, and though economic risks were “muted”, Margareta Drzeniek-Hanouz from the WEF said “the data tells us a different story”, noting individual economic problems in play. “A widening economic recovery presents us with an opportunity that we cannot afford to squander, to tackle the fractures that we have allowed to weaken the world’s institutions, societies and environment,” said Professor Klaus Schwab, founder and executive chairman at WEF. “We must take seriously the risk of a global systems breakdown. Together we have the resources and the new scientific and technological knowledge to prevent this. Above all, the challenge is to find the will and momentum to work together for a shared future.”

Different firms, different risks

The publication of the WEF risks report comes just weeks after risk consultant Eurasia Group released its Top Risks 2018 study, which identified the top 10 political risks that would most likely occur over the course of 2018. These, in descending order, were China loving a vacuum, accidents, a global tech Cold War, Mexico, US-Iran relations, the erosion of institutions, “Protectionism 2.0”, the UK, identity politics in Southern Asia and Africa’s security. Red herrings were also noted in the forms of a “besieged” Trump administration having little ability to enact destabilising or any other sort of policies; the Eurozone again shrugging off political risk; and Venezuela’s political conflict stopping as President Nicolas Maduro proves surprisingly resilient.

However, the New Atlanticist, the public policy blog of the Atlantic Council (which promotes constructive leadership and engagement in international affairs, based on the Atlantic Community’s central role in meeting world challenges) had a differing set of top international political, security and economic risks for 2018 based on geopolitical circumstances around the globe. These were North Korea’s nuclear activity; the US posing obstacles to global trade; the US in further crisis; Russian President Vladimir Putin’s post-electoral problem; the question of whether Europe can function without a crisis; continued Middle East conflict; worsening chaos in Yemen, the fact that the slow pace of reform in Saudi Arabia risks creating frustration and resentment; and a scuppered Sputnik-style movement for the US and Europe. Also included in the top risks were the growing terrorist threat outside the Middle East and populism.

These predicted risks should be in the psyches of all shipping executives; they are already in the minds of international chief executive officers. PricewaterhouseCoopers’ (PwC) 21st CEO Survey: The Anxious Optimist in the Corner Office showed a marked increase in concern about risks (with regards to their organisations’ growth prospects). In a ranking of the top factors of “extreme concern”, first was overregulation, while coming in second, third and fourth respectively were terrorism (41% of respondents), geopolitical uncertainty (40%) and cyber threats (40%). 38% of respondents were “extremely concerned” about the speed of technological change, 35% felt this for populism and 31% felt this for climate change and environmental damage. 

PwC chairman Bob Moritz commented: “The higher level of concern is being driven by larger societal and geopolitical shifts, rather than the dynamics of business leaders’ own markets. It’s clear their mid to long-term confidence in revenue growth is tempered by threats the business world is not used to tackling directly itself.” Mr Moritz added that the heightened levels of chief executive concern about wider societal threats “underlines how companies are navigating an increasingly-fractured world”. “Chief executives across every region and country that we spoke to recognise that the old ways of measuring growth and profit won’t work alone for the future,” he noted.

Yet, CEO optimism is booming. The PwC study found that a record number of CEOs were optimistic about the economic environment worldwide (at least in the short term). 57% of business leaders said they felt that world economic growth would improve in the upcoming 12 months – nearly double the figure from last year. Moreover, for the 21^st study, 42% percent of CEOs said they were “very confident” in their company’s growth prospects over the next year, while 54% of them said they were planning to increase their staff headcount this year.

Those in shipping need to weigh the risks with the opportunities that these reports and surveys offer up.