For the second year in a row, risks from energy price shocks is the primary concern for executives in Australia according to World Economic Forum’s (WEF), Regional Risks for Doing Business report.
The report published along with strategic partners, Zurich Insurance Group and Marsh & McLennan Companies, lists unemployment, failure of national governance and energy price shocks among the top worries of executives across various regions. There are significant differences in risk perceptions across the eight regions covered in the report with more than 12,000 executives highlighting concerns ranging from economic to political, societal and technological.
The top five risks for Australia include:
1. Energy price shock
3. Asset bubble
4. Failure of regional and global governance
5. a)Fiscal crises
b)failure of critical infrastructure
The Australian data provides a window into the threats that are top of mind for local executives and these are the risks that brokers can help manage for their clients. In 2016, energy pricing’s risk rating was fifth on the list for Australian businesses. At a time of heightened uncertainty across the international system, understanding the regional risks landscape is more important than ever, states the report.
“By drilling down to regional and country-level data, this new Regional Risks for Doing Business report allows us to gauge how risk sentiment is evolving around the world. Cyber-attacks are increasing in prominence, but it is striking how many business leaders point to unemployment and national governance as the most pressing risks for doing business in their countries,” said Aengus Collins, Head of Global Risks and the Geopolitical Agenda at the World Economic Forum.
“Cyber-attacks are seen as the number one risk for doing business in markets that account for 50 per cent of global GDP. This strongly suggests that governments and businesses need to strengthen cyber security and resilience in order to maintain confidence in a highly connected digital economy,” said Lori Bailey, Global Head of Cyber Risk, Zurich Insurance Group, and Member of the Forum’s Global Future Council on Cybersecurity.
“While large cyber-attacks are the number one concern of executives in advanced economies there is growing apprehension about the potential for national governance failures in emerging markets,” said John Drzik, President of Global Risk and Digital at Marsh. “Across the globe, businesses are also concerned with rising geopolitical friction that has already resulted in rising tariffs and sanctions and which could further fuel the growing threat of expropriation or political violence.”
Cyber-attacks are the number one risk in Europe, East Asia and the Pacific and North America. This points to growing concerns about technological risks – cyber-attacks were the top risk in two regions, according to the 2017 survey (East Asia and the Pacific and North America), and only one region in 2016 (North America).
Failure of national governance ranked number one in Latin America and South Asia, highlighting the costs of political strains that have been evident in much of the world in recent years. In the energy-rich regions of Eurasia and Middle East and North Africa, energy price shocks were ranked as the top risk to doing business. Unemployment was perceived as the top risk for doing business in sub-Saharan Africa, representing mostly the absence of demand in the region.
“Given the current geopolitical uncertainty globally, cooperation within and among regions is of critical importance. Understanding the evolving risks in different regions is therefore top of mind for business leaders,” said Mirek Dusek, Deputy Head of Geopolitical and Regional Agendas and Member of the Executive Committee at the World Economic Forum.
Top five risks of doing business by region:
|Region||Risk #1||Risk #2||Risk #3||Risk #4||Risk #5|
|Latin America and the Caribbean||Failure of national governance||Profound social instability||Unemployment or underemployment||Fiscal crises||State collapse or crisis|
|North America||Cyber-attacks||Data fraud or theft||Extreme weather events||Fiscal crises||Energy price shock|
|Europe||Cyber-attacks||Asset bubble||Failure of national governance||Failure of financial mechanism or institution||Unemployment or underemployment|
|Middle East and North Africa||Energy price shock||Unemployment or underemployment||Terrorist attacks||Failure of regional and global governance||Fiscal crises|
|Sub-Saharan Africa||Unemployment or underemployment||Failure of national governance||Energy price shock||Failure of critical infrastructure||Fiscal crises|
|Eurasia||Energy price shock||Interstate conflict||Fiscal crises||Unemployment or underemployment||Profound social instability|
|East Asia and the Pacific||Cyber-attacks||Unemployment or underemployment||Asset bubble||Energy price shock||Data fraud or theft|
|South Asia||Failure of national governance||Unmanageable inflation||Unemployment or underemployment||Failure of regional and global governance||Cyber-attacks|