Global growth opportunities outweigh elevated geopolitical and economic risk landscape, finds Marsh political risk report

Persistent political instability, especially when compounded by the impact of inflation, threatens the economic and investment environment and, in some cases, the societal structure of emerging markets. This is according to the 2023 Political Risk Report from Marsh Specialty.

The global political and economic environment is likely to remain fragile throughout 2023, as a number of factors work in concert to compound the impact of global risks.

The report identifies four areas where increasing risk threatens global trading, security, and investment environments into 2023:

  • persistent political instability;
  • economic retrenchment;
  • competition for strategic resources; and
  • supply chain diversification.

It also highlights substantial global economic growth drivers that present opportunities that outweigh these risks, if managed properly.

“While it may be unnerving, there are many opportunities for businesses and investors to grow in today’s elevated geopolitical and economic risk environment,” said Nick Robson, global head of Credit Specialties, for Marsh Specialty.

“If the risks are identified, managed, and mitigated effectively, the prospects for short, medium, and long term growth frequently outweigh the risks presented by short term volatility.”

Protectionist trend

The World Economic Forum’s Global Risks Report 2023 calls this compounding effect of related global risks “polycrises,” noting that such polycrises have turned the focus of nations inward.

The Political Risk Report identifies this inward focus on economic security, which often comes at the expense of free trade, as another major shift threatening global trade, security, and investment.

It warns that decisions made by key economic powers on various issues — ranging from fertilisers and microchips to the energy transition — will continue to have global repercussions.

Despite the current elevated risk environment, there are clear signs that the perceived level of risk exceeds actual risk levels and that at least four significant global economic growth drivers could fuel economic recovery and improve security.

According to the report, the lockdown backlog of infrastructure investment points to a rise in future activity and expansion globally, while the push to meet 2030 net-zero energy transition goals will see a range of innovative investment activity.

The need to diversify supply chains to achieve greater food and energy security will continue to attract investment opportunities, as will the substantial rise in government defence spending worldwide to support allies, counter threats, and accelerate the sector’s modernisation.

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