Risk Indicator: What next for global business?

1 Big opportunities in Central and Eastern Europe

Central and eastern European economies present a major opportunity for multinational businesses, according to Eurasia Group. In 2010 the GDP of central and eastern Europe increased by 4%, according to the IMF, while imports rose 12% and exports increased 10%.

Growth in the region is heavily dependent on membership to the EU, however, and countries like Poland and Hungary have seen setbacks to their plans to join the euro.

2 China’s five-year plan

China’s new five-year plan focuses on domestic consumption and improving the country’s infrastructure, according to Eurasia Group.

China plans to base a big portion of its economy on cutting-edge technologies like electric-powered vehicles, renewable energy and biotechnology, but interested companies should consider the risk of intellectual property theft through industrial and cyber espionage, which is an issue there.

3 Alternative energy boom

New extraction technology and high fuel prices are creating a boom in energy from unconventional sources, such as shale gas and tight oil, Eurasia reports.

The USA’s Energy Information Administration claims that the number of horizontal wells producing shale gas increased by more than 4,000% between 2004 and 2009, yet China has the largest reserves of shale gas in the world at around 1,275 trillion cubic feet.

Key risks involved in the new energy boom include security of the intellectual property for mining processes and significant costs to establish a mine.

4 Middle East in transition

Instability in the Middle East and North Africa will create sustained risks for business in the region, says Eurasia.

“The Middle East is the only region outside sub-Saharan Africa where the number of malnourished people has risen since the early 1990s,” says JLT head of credit and political risk Dr Elizabeth Stephens.

The rising cost of bread was one of the key drivers for revolution in Egypt. As such, the continued risk of civil unrest increases the possibility of damage to business assets or business interruption.

5 Tough financial regulations

Different interpretations of the financial crisis by individual countries have resulted in a lack of co-ordination at a global level. Increased regulation means that transaction, disclosure and compliance costs will all increase for international companies.

To view the infographic on these five future risk scenarios, click on the pdf, right.