As attention turns to the men’s football World Cup in Qatar, the intersection of sport, entertainment, major events and the world they exist in are in sharp focus. RiskMap 2023 is a forecast of business risks for the coming year and the outlook is challenging.
Most economists predict recessions in major economies. International order, the rule of law and other mainstays of stability are increasingly scarce. While business leaders have become adept at planning around specific risk events happening in specific markets, it is much harder to plan for wholesale disruption, whether in global energy markets or global regulatory regimes. Indeed, as more governments adopt more protectionist measures, businesses face a landscape of sanctions and data privacy regimes where compliance with mutually contradictory legislation becomes almost impossible. What does that mean for the sport, entertainment and major events industries?
Deconfliction and de-coupling in the US-China relationship
The US-China relationship poses the greatest geopolitical risk to businesses in 2023. US-China conflict remains very unlikely in the coming year, but competition and confrontation are moving from the trade and technology realms into the military domain. The prospect of an accident or miscalculation is real.
Short of active conflict, sports organisations in 2023 must monitor concerted efforts to decouple critical supply chains, which will only accelerate as China and the US absorb and interpret the lessons of the conflict in Ukraine
US, Chinese and other multinational organisations will spend 2023 updating and accelerating their strategic plans as China’s growth prospects waver. More recent US measures targeting advanced technology are also likely to drive a decline in US investment in China, especially in strong sectors like data analytics and artificial intelligence – both of which assume critical responsibilities in the sport and entertainment sphere. Policy restrictions and perceived political risks will likewise continue to deter Chinese investment in the US. The emergence of regulatory and compliance dilemmas for companies trying to do business in both countries seems closer than ever.
While China was once seen as the untapped growth market for many international sports and leagues, it’s now widely viewed as politically perilous. Recent consequences of wavering relations include the removal of NBA games from China’s national broadcast network. Nonetheless, decoupling will be selective and rising bilateral tensions will not affect all companies equally. Those in strategic and high-tech sectors in both countries, sport and entertainment included, will face an increased degree of political risk.
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Cyber security and the breakdown of global networks
Increasing technology investments have been accelerating developments in all sectors, with virtual reality and artificial intelligence rising in prominence in sport. While predictive analysis allows for such things as the automation of ticket sales and analytical performance processes, the efficiency and convenience of tech solutions bring increased risk exposure. Just as dependencies on cyberspace grow, the principles and assets governing cyberspace are eroding. Estimates indicate that more than 60% of the world’s GDP will be digitalised in 2023 – and the ecosystem supporting it, cyberspace, is radically transforming.
In 2023, expect to see the emergence of a fundamental breakdown of global networks into distinct regional, or even national architectures, caused by the weaponisation of cyberspace and a clash of national interests. The cyber arms race will accelerate in 2023, aided by an expanded attack surface and a significant increase in automation across the entire spectrum of cyber threats. Capability developments are a priority for all threat actors, and the potential for kinetic damage is at an all-time high as IT and OT networks converge.
Network and system resilience will be tested like never before in 2023. The proliferation of vulnerabilities, connectivity and threat actors targeting current and emerging technologies will challenge even the most advanced cyber security teams. While in recent years, many attempted to centralise their operations and simplify their existing digital supply chain, the reality of nationalism in cyberspace will reverse many of these efforts. Ultimately, tomorrow’s digital organisation will be a fragmented one. The key to avoid the death of global networks will increasingly be decentralisation – reversing the prevailing trend towards centralisation to gain efficiencies and control. Beyond 2023, decentralised digital environments will provide greater agility, security, and resilience to those that adopt them. Sport and entertainment organisations must ensure they are positioned at the forefront of this adaptation curve.
Economic headwinds bring regulatory turbulence
For many businesses, the dominant risk is the global economic situation, which cannot be divorced from geopolitics and conflict. As governments go through the toolkit of responses, austerity, shortage, and strife will set the tone in 2023 as they target revenue and strive for financial stability. Wherever they turn, organisations will feel the heat one way or another.
Closer scrutiny and policy changes will not impact sectors equally. Government moves to tame failing economies and/or ease public anger over higher costs of living will likely most impact the highest-profile, the highest-earning, and may include strategically sensitive sectors like sport and entertainment.
In some cases, government will look to shield and protect businesses to help them navigate through tough economic conditions. But where consumers are facing the prospect of tighter living conditions or higher taxes, the impact on business will be significant too. There will be dampened demand for luxury goods and services like entertainment. In an era of populism and political instability, rash government intervention and decision-making may further destabilise business environments, rather than shore them up.
Regulatory changes in 2023 will establish a new threshold in government intervention in the global marketplace. They will be designed to be felt, at home and abroad, on company balance sheets and beyond. Companies will be forced to grapple with a fresh degree of uncertainty around access – to commodities, to utilities, to influence - and around their regulatory responsibilities - taxation levels, trade controls, operating restrictions. Where there is uncertainty, there is risk.
To shield from inevitable regularity turbulence, sports organisations must remain particularly alert to global trends and maintain an up-to-date understanding for the drivers of regulatory change – such insights will feed proactive risk anticipation and change management. The time has never been riper to monitor the factors that drive the nature, tone and targets of government policy moves and will at the same time determine reactions to them.