Risk predictions roundup

With risk predictions for the next 12 months ranging from regulatory changes and competition from digital competitors to global issues such as the US-China trade rift and extreme weather conditions, 2019 could prove to be an interesting year.

As ever, experts are predicting some risks that businesses can address on an individual level – for example attracting and retaining top talent – but they are also highlighting global risks that companies can’t directly affect but need to respond to.

The geopolitical picture

According to the Eurasia Group consultancy, the global geopolitical environment is at its most dangerous in decades. They say that global decision-makers are so focused on the daily crises that arise from a world without leadership that they’re allowing a broad array of future risks to germinate, meaning the outlook for institutions such as the European Union and the World Trade Organisation isn’t great.

They point, for example, towards the wider impact of the relationship between the world’s two largest economies, the United States and China, and their ongoing trade war, warning us to expect more discord in the arenas of technology, economics and security – with global supply chains potentially affected.

Specialist risk consultancy Control Risks also includes the confrontation on trade between the US and China in its list of the top five risks for 2019 which it says businesses need to track in the coming year.

The situation in Europe is also on the risk list for both organisations, with the EU holding parliamentary elections in May and potential gains for euro-sceptics from both the left and right which may undermine Europe’s ability to function. This is of course complicated by the current position in the UK in relation to Brexit, where at the time of writing almost any outcome remains possible.

Control Risks has specifically highlighted 2019 as a year of ongoing uncertainty for UK business. It predicts that the country’s future relationship with the EU will remain unclear, and many businesses will continue to ‘Brexit-proof’ themselves by shifting at least some of their operations elsewhere in the EU.

Technological risks

Eurasia Group predicts a reduction in the financial and human capital available to drive technological development, due to security concerns leading states to reduce their exposure to foreign suppliers, privacy concerns causing governments to more tightly regulate how their citizens’ data can be used and economic concerns leading countries to put up barriers protecting their emerging tech champions.

Control Risks agrees that this is an issue, pointing out that the different ways data is viewed around the world could cause a problem – for China, data is something to be controlled; for the EU, data is something to be protected; the United States sees data as something to be commercialised. They warn companies to brace themselves for the challenge of collecting, storing and transferring data within and between these three domains against a backdrop of inconsistent enforcement and escalating cyber security threats.

Risks on a more local level

Global consulting firm Protiviti has worked with North Carolina State University’s ERM Initiative to produce Executive perspectives on top risks 2019, after surveying global boards of directors and executives.

The results of their seventh annual risk survey suggest that organisations worldwide share a number of concerns including shifting cultural norms and expectations of accountability; disruptive business models and ‘born digital’ competitors; emerging technologies; shifting customer preferences and demographics; record lows in unemployment and tightening labour markets; cyber breaches on a massive scale and big data analytics.

They say that the overall global business context is somewhat riskier in 2019 relative to the last two years, and that the critical issues for boards and executives include succession challenges, talent retention and the regulatory environment.

It seems that established businesses now face concerns about meeting performance expectations, with worries about their existing operations and legacy IT infrastructure competing against companies that were ‘born digital’ rocketing up the list of risk issues from tenth to first place.

However, also on the digital side of things, cyber threats have fallen from third to fourth in the risk rankings; the rapid speed of disruptive innovations and new technologies has fallen from first to sixth and resistance to change operations has fallen from second to fifth.

On the other side of the coin, succession challenges and the ability to attract and retain top talent, and regulatory changes and scrutiny have both moved up the rankings.

As with all annual predictions though, risks don’t really appear out of nowhere or disappear off the radar, they simply develop organically and reorder themselves in terms of likelihood and impact; so, much as our new year’s resolutions (if we make them) tend to go along the same lines from one year to the next, the main threats and challenges predicted for 2019 shouldn’t really come as a surprise to anyone.

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