RiskMap 2020 Special Edition
Top 5 Risks | RiskMap 2020 Special Edition
Top 5 Risks - RiskMap Special Edition
The COVID-19 pandemic is disrupting almost every measurable human activity. The way we work – whether we remain at home, have returned to offices and factories or have been there all along– feels dramatically different. The way we live – with our kitchens transformed into classrooms and offices – is filled with new rhythms and habits.
In addition to the countless lives lost or damaged, the fabric of business and society is being rewoven into a new pattern.
The disruption to our very sense of time is profound but little discussed – so much else is more urgent. For some, the pandemic brought time to a standstill. For others, the clocks went into overdrive. And for just about everyone, the question of what happened yesterday, last week or last month has become a distorted guessing game.
Time and risk are fellow travellers. Typically, they travel in the same direction. The distant, unknowable future usually holds the greatest risk; our comfort zone is the short term, where nothing hides out of sight.
The pandemic has stood that principle on its head. Now, the greatest risk resides in the short term, which remains full of unknowns. The “new normal” has become a cliché for the world we are feeling our way towards. It’s a phrase loaded – falsely, perhaps – with suggestions of a return to something familiar or at least predictable.
There is some comfort to be taken in this landscape of uncertainty. Broadly speaking, we do not believe the pandemic has created substantial new categories of risk. However, putting pressing public health concerns aside momentarily, the COVID-19 pandemic has intensified and accelerated most of the risks and trends that pre-dated the disease.
Put another way, we are, for the time being, stuck with the same risks we’ve always had, but more so.
The same is true for Control Risks Top 5 Risks for 2020, as initially released in December 2019. Each of them remains acutely valid, and even more vivid. This is not hubris or “We told you so”. We certainly did not forecast the COVID-19 pandemic.
In fact, the only change to our Top 5 Risks for 2020 is the order in which we rank them, with the political and economic impacts of the pandemic pushing the risks previously ranked in fourth and fifth place to the fore.
- 1. Leaders without strategies bungle the recovery
With a few exceptions, autocracies and democracies have fumbled at least some aspects of their pandemic responses – they both confused and exasperated their populations and their business communities. Many governments moved to fight the pandemic alone, with transactional deals in place of a collaborative global response. Most of the few attempts at cooperation – sending ventilators or other supplies to countries in need – came undone amid claims of mismanagement, fraud or political ill will. Successes were fewer still.
Previous waves of crisis – the global financial crash of 2008, for example – at least brought a coordinated response among key financial centres and their markets and regulators. The pandemic, however, seems to be the moment the world wasn’t waiting for, and apparently wasn’t prepared for, either.
Perhaps there was no other way. Years of simmering populism, nationalism and protectionism were never going to build the sort of trust and transparency countries need to work effectively with each other in a time of crisis.
The advance of the virus has bolstered populist critics of globalisation and entrenched the polarisation and mistrust of government. Just as the world entered the crisis with a crunching of gears and multiple wrong turns, it is reversing out of it in the same manner. A globally fragmented resumption will further distract key governments from addressing long-standing strategic issues that loomed at the start of the year.
This fragmentation, and the complexity it creates, will persist through the end of 2020 and most likely far beyond. World leaders, each in their own patch, will continue to act unilaterally. Companies with global footprints will themselves have to become leaders in navigating a minefield of conflicting political priorities, regulatory regimes and pandemic de-escalation.
- 2. Economic paralysis meets political weakness
Prior to the pandemic, a number of countries presented a volatile mix of political instability and economic vulnerability. We thought many of those countries would come under extreme pressure in 2020. This remains the case, and the list is growing.
During the early phases of the pandemic, it was difficult to identify the trouble spots. Even as the “sudden stop” of economic activity hit with breath-taking speed, the pandemic’s earliest political impact was to create a “rally around the flag” effect that initially bolstered many governments in crisis. With an eye on the crises in Wuhan, Tehran and Lombardy, governments could trumpet stringent measures as blunting the pandemic wave and saving countless lives.
Now that there is more time – and space – for criticism, we are seeing a much sharper picture of government instability with roots in politics, economics or both. This is the case for countries with shaky political coalitions. This is the case for countries heavily dependent on oil exports. This is the case for countries that have enacted budget-busting bailout programmes. Economic and social factors are beginning to outweigh public health; for millions across the world, the choice is increasingly between unsustainable hardship and risking infection by continuing to work.
Renewed economic activity will not lift all the ships of state equally. Brazil stands out as a country whose handling of COVID-19 threatens political stability. Egypt and Spain too will face political stresses, but everyone is in uncharted territory. Watch all of them, with an eye toward their political longevity.
- 3. The drivers of activism are being supercharged
2019 and the early days of 2020 revealed a world convulsed by activism, fuelled by a now-familiar list of drivers: income inequality, climate change, gender equality, the rights of racial and ethnic minorities or indigenous people, and refugees and migration, among others. COVID-19 lockdowns put a lid on many mass protest movements, but as restrictions are lifted, so too is the lid on social activism.
For 2020 and beyond, activism and civil unrest have a new driver: the pandemic. Governments and companies will now be held to account for their actions and performance as leaders and as corporate citizens when the world was on its knees. Economic distress and healthcare inequality will underpin new political challenges. Activist societies already cite the COVID-19 crisis as an impetus for transformative environmental, social and economic policies.
Both companies and governments should expect to be grilled for their pandemic management tactics. Governments will be held to account for their death rates and infection counts. But the public will also want to know what companies did during the crisis. Which companies laid off workers, and how many? Which companies had inferior healthcare coverage? Which companies were good to their customers, suppliers and surrounding communities?
Systemic racial discrimination in the US – which draws as well from income inequality and is accelerated by the pandemic’s disproportionate blow to racial and ethnic minorities– promises to make the coming year pitched with protest. As large protests worldwide in solidarity show, addressing racial, ethnic, LGBTQI, sectarian and other forms of discrimination is not just a US – or indeed a purely governmental – problem. Global companies will come under increasing pressure to ensure their diversity, inclusion and ethics policies meet the moment.
After the COVID-19 hiatus, masked and socially distanced, the activist society is taking back to the streets. A reckoning awaits.
- 4. COVID-19 and the US campaign trail
No longer able to campaign on a robust US economy and facing the most significant civil unrest in generations, incumbent President Donald Trump is pulling out the stops to shore up sagging support in critical swing states. His opponent – former vice president Joe Biden – is gaining simply by standing still.
China. The WHO. Antifa. Democratic governors. Trump’s many purported adversaries threaten to drown out the so-called “invisible enemy” of COVID-19 and – conveniently – distract from his administration’s haphazard response.
The US-China rivalry will work hard on the campaign trail. The bitter COVID-19 blame game has been a catalyst for strategic rivalry that had threatened to boil over prior to the pandemic. The COVID-19 trauma has only deepened the determination in both Washington DC and Beijing to dig in for a long-term US-China struggle, including through pursuit of industrial “self-reliance” and increased global influence.
The Trump and Biden campaigns will continue to accuse each other of being soft on China, while the administration and Congress will stack pressure on Beijing up to and beyond the election. The US election is likely to be a waypoint, not an inflection point, in the trend towards strategic competition.
Concurrently, multinational companies – and their dense trans-Pacific supply chains – will be key players shaping how far US-China competition upends established business patterns. For countries and companies already caught in the middle of the trade and technology rivalries since 2018, the squeeze between US and Chinese pressures now looms even larger and closer than it did in January. In particular, COVID-19 accentuated national security concerns around biotechnology, pharmaceuticals and medical devices.
The election itself will be fraught and unprecedented. The US has held successful presidential elections at times of national crisis before – think 1864 or 1968 – but not in the crucible of a deadly global pandemic. As 2020 has already shown, five months is an eternity: there is still a long road before 3 November.
- 5. Cybersecurity: the stakes have never been higher
How is your internet connection holding up? Many people have spent time working from home and still are - potentially working outside the perimeter of their companies’ cyber protection.
The unprecedented alignment of capability and intent set 2020 up to be the year when we would see a large-scale attack on critical infrastructure. COVID-19 has raised the stakes still higher.
Cyber criminals know we’re vulnerable – a spike in ransomware operations globally is adding to an already complex crisis management cycle for many businesses. It won’t stop there.
Activists are taking to the digital streets in large numbers as physical restrictions and violent repression make cyber activism an increasingly effective tool for projecting opinions. They also have more time on their hands.
State-sponsored operations are hyperactively targeting the scientific and medical communities researching for a COVID-19 treatment or vaccine. The geopolitical turmoil the pandemic has sparked will see cyber operations – always inexpensive and easy to deny – spike as a tactic. And a world waiting for the US to elect – or re-elect – a president will not wait idly on the side lines. The bots are balloting, too.