Unpredictable politics main risk for businesses in 2018

Companies worldwide will continue to face profound uncertainty and be challenged by unpredictable political decision-making, according to Control Risks’ annual RiskMap report.

The wave of political instability felt in 2017 will continue and potentially increase, due to personal power rivalries, the risk and security consultancy emphasised.

“What is certain is that global dynamics and perceptions of risk are being shaped by a more robust, personalised and unpredictable style of political leadership in many parts of the world, making business planning very difficult,” said Richard Fenning, CEO of Control Risks.

The report identified several conflict areas that businesses should take into account when strategising for the new year.

Tension in the Middle East, between Iran and Saudi Arabia on the one hand, and Israel and Palestine on the other, will have to be closely watched, Control Risks warned.

The continuous cat-and-mouse game on the Korean peninsula – between North Korea’s nuclear weapons programme and international attempts to thwart it – will remain a concern, but direct war scenarios seem unlikely.

“The search is on for the least bad option. The risks of miscalculation and accidental escalation are the highest they’ve been since North Korean leader Kim Jong-un assumed power,” wrote analysts.

Moreover, the power triangle among unconventional leaders in the US, Russia and China might lead to further disruptions in trade and diplomacy.

“A collection of assertive world leaders find foreign companies convenient targets. More than ever, knowing the mind of the person at the top is essential,” disclosed the report.

“Despite the most positive global economic outlook since the end of the financial crisis, we are entering a year of geo-political fragility that has the potential to trigger shockwaves to global stability and business confidence,” added Control Risks’ CEO Fenning.

Europe is not left untouched by geopolitical events either.

The escalation between the Spanish government in Madrid and their counterparts in Barcelona has resulted in a deterioration of risk scores for the whole country.

Regional elections are not expected to resolve the independence issue, and more discussion is yet to come, possibly with EU mediation.

UK trade negotiations with Brussels are perhaps the most unpredictable and nerve-racking event this year for businesses in Europe, aiming to have Brexit contingency plans ready, in case of a no-deal scenario.

“Global businesses must go into January with a cool head. Trying to understand the motivations of global leaders and the potential impact of their actions will be critical to making the right strategic business decisions,” concluded Fenning.