In an era of volatility, a new crisis is always around the corner, threatening business everywhere
We're mostly through the pandemic, but business strategies are likely to continue being impacted. Geopolitical risks, which tend to be highly interconnected and contagious, are setting off a chain of risks and repercussions businesses are vulnerable to, from higher energy prices to inflationary pressures and tightening financial conditions.
How might these risks affect your business — and what can you do about it?
Eurasia Group warned in its annual forecast of political risks that the year will "remain in the depths of a geopolitical recession, with the risks this year being the most dangerous we have encountered in the last 25 years". In this report, KPMG takes a closer look at the top risks for 2023 and explores risk management approaches that can help mitigate their impact on your business.
Top 3 bottom lines for business
Free and unfettered globalisation is being reshaped by national security policies, marking a significant shift away from the international rules-based order which once governed global relations. Highly integrated and complex supply chains that were once celebrated as a hallmark of free trade and economic efficiency are now perceived as a vulnerability amid rising geopolitical competition.
Many challenges confronting businesses, such as trade barriers, fragmented regulatory regimes, access to key technologies and supply chain disruptions, are driven by this new model of globalisation. To steer their companies in this new environment, leaders need to reexamine outdated business models. Understanding how national security is shaping the new model and assessing the impact of politics on business objectives are now necessary to help seize opportunities and avoid risks.
Eurasia Group's report and KPMG's dynamic risk assessment highlight a critical bottom line: the current "polycrisis" and ensuing geopolitical recessioin are deteriorating eonomic conditions, mainly through high inflation and the unravelling of years of global advancements. Despite challenging times ahead, our CEO Outlook shows that 71% of CEOs have a renewed sense of global economic confidence over the next three years.
As CEOs prepare their battleplan for the road ahead, they should pay heed to four interlinked issues that will be impacted by rising geopolitics: stagflation; the energy and food crisis; cost of living crisis and inequality; and the future of ESG. Monitoring and managing these macro trends at the board level will be key to builiding business resilience in 2023 and beyond.
Today, we find ourselves on the cusp of an advanced robotics and AI revolution that may very well provide a much needed boost to the global economy and usher in a new industrial revolution. Yet, countries and territories remain locked in geopolitical competition by prioritising strategic resilience and national security aims.
With capital costs increasing and emerging markets offering more uncertain growth prospects, businesses may be tempted to retreat into excessive caution. This approach, however, risks overlooking a once-in-a-generation opportunity to be at the frontier of channelling major tech advancements into significant productivity gains.
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