The world order is in flux, and it will be some time before it becomes clear what new rules and norms apply, says the CEO of the forecasting consultancy Control Risks.
Nick Allan writes: “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 understanding.”
Writing as part of the risk consulting firm’s annual Risk Map, he points to 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.”
Governments will also be grappling with the implications of artificial intelligence; from an economic perspective, with a view to the political and security impact, he adds. “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.”
The Risk Map covers climate disruption; emerging technologies and how digital integrity can cause a ‘trust deficit’ among people; and ‘crisis everywhere’, given the sheer number and diversity of crisis events anticipated. Geopolitics is driving a multitude of political, regulatory, operational and security risks, all with the potential of reputational overspill, the firm says.
As for risk management in 2024, it demands a multi-disciplinary approach, the consultancy advises. In a world where single risks may have a multitude of sources and/or impacts, identifying, assessing and treating risk must be shared across functions, it says.
Nick Allan sums up that corporates 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.”
