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Uncertainty is inevitable in 2024. Do not let it become the enemy of opportunity
RiskMap is the leading annual forecast of business risks, compiled by Control Risks experts worldwide. With risk ratings and in-depth analysis, RiskMap is your essential guide to mitigating risk and seizing opportunity in the year ahead.
By Nick Allan, Chief Executive Officer, Control Risks
One of the themes in our Top Risks for 2024 is The Great Realignment, a dynamic that is laden with risk and opportunity. It is a comment both on the state of the world and on the obligations facing companies that want to thrive in the coming year. Casting back, the post Covid bounce threw up a whole new set of economic challenges layered with geopolitical turmoil. The result is that many of the most pressing issues of the age, from climate change, war, unrest, and debt have been denied the required level of international co-operation. The widening conflict in the Middle East is just manifestation of this neglect.
Words like unprecedented are over-used and the complexities of the current era certainly have historic parallels, but not in recent times. The world order is in flux, and it will be some time before it becomes clear what new rules and norms apply. As with most times of change, there are winners and losers. For business it will be essential to ensure that risk can be evaluated objectively and with a variety of lenses. An excess of uncertainty drives a pessimistic view of the future and a reluctance for firms to take calculated risks in search of opportunity. For many of our clients, political risk seems omnipresent, whether in home markets where the outcomes of elections look hard to call or in international locations where conflict, political violence or regulatory overload threaten investments. Companies that can localise their operations will be more successful on a global scale. This is a trend that has been building over time; sweeping global narratives are often less use than granular, local under- standing. Localisation is the currency of the great realignment.
The era of globalisation is not over, but its character is changing, and companies are spending more time and resources to uncover their critical dependencies and build resilience. The coming year will see more geopolitical competition and, in some areas, conflict. At the country level, internal political disfunction and contest will distract and prevent effective engagement with some of the issues that require global collaboration. With economic uncertainty and the long hangover from the pandemic, many governments have a short-term outlook based on domestic political expediency that pays lip service to more strategic planning. For business this presents a real challenge where corporate planning cycles and investment decisions require greater certainty.
At the global level, the damaging effects of the excess debt and recent inflation are still working their way through political and economic systems. Growth is hard to find, and emerging economies, in particular, find themselves wrestling with the need to create jobs and invest at a time where debt costs are surging. Many nations borrowed to support themselves during the pandemic, but this was emergency spending rather than investment and is now a significant drag on financial resources. Economic stresses all too quickly feed into political ones and the populism and nationalism of recent years is set to continue.
In 2024 the nationality of a business will remain of primary concern in many places. This is a continuation of a trend where global businesses are drawn into geopolitical tensions by dint of their location of origin. The politicisation of regulations, the complexity of sanctions regimes and the numerous foreign investment restrictions make this an elevated risk trend in the year ahead. Indeed, regulatory risk in all its facets will continue to weigh heavily on international firms. Primary among this will be the restrictions on data sharing and mandates around storage. For years businesses have relied on the easy sharing of data across borders but new laws in most key markets are forcing often radical change, with stiff penalties for those that do not comply.
In addition to data controls, governments will also be grappling with the implications of artificial intelligence - from an economic perspective but also with a view to the political and security impact. Mainstream news organisations are already working hard to step up verification services to keep on top of AI-generated content that appears as a torrent around any major geopolitical event. As AI improves and is used to generate content that is indistinguishable from reality to most people, the potential effects on domestic and geopolitics will be significant. For business the obvious challenge is the need to protect brand and reputation if targeted, but also how to manage accurate information at times of crisis. Cyber threat actors will continue to expand the use of AI in their operations, increasing the pace and scale of attacks. The velocity of the AI revolution may not match the most hyperbolic predictions, but the rapid advances to date suggest that the world is at the dawn of a new age, with all the opportunity and potential upheaval that such revolutionary moments entail.
With all the challenges and potential crises that businesses face, it will be important not to miss the bright spots and trends. With national elections in
India, the most likely outcome sees Prime Minister Narendra Modi returned to office with a mandate to drive further economic reform. With a population of 1.4 billion, a rising middle class and no shortage of human talent, the next decade looks set to be the one where India delivers on the promise that has long been there. India’s economic strength will be matched by increased robustness on the global stage. While the country will continue to be a challenging market to invest in, the numbers mean that it will be one that few companies can ignore. 2024 is likely to see an early rush of investment in India turn into a steady flow, particularly when other sources of opportunity could be hard to find.
Companies investing in new markets will need to understand the power dynamics at play at multiple levels; old assumptions will need to be challenged. The forces of populism and nationalism are still in the ascendancy and into this heady brew can added great power and middle power competition. As if that were not enough, the past year has demonstrated with stark clarity the consequences of a changing climate. At the most basic level, countries have had to deal with flood, drought, wind, and fire in ways that a few years back would have been seen as generational events. Climate disruption will drive migration, undermine economic prosperity, and test societal resilience.
International companies will at times feel overwhelmed by the breadth of issues that they need to consider, from their own operations to taking greater responsibility for and dealing with increased scrutiny of their supply chains. The temptation may be to try and build unrealistic levels of certainty. The winners are likely to be those firms that can be adept, agile, and clear about their risk tolerance. Most corporate leaders would surely ask for a little less risk to manage in 2024 than they have had to deal with these past few years. Such wishful thinking looks set to remain just that.
About the Company
Control Risks is a global specialist risk consultancy that helps to create secure, compliant, and resilient organisations. Combining unrivalled expertise, experience and reach with the power of data and technology, we provide the insight and intelligence needed to stay on track, realise opportunities and grow. Visit www.controlrisks.com for more information.
