A seismic sea change in corporate perceptions of geopolitical risks has emerged from a new report by business advisers Willis Towers Watson, in partnership with research house Oxford Analytica.
In its most remarkable finding, the study – How are leading companies managing today’s geopolitical risks? – found that the US has become a leading cause for concern.
The report cites a fading of certainties from the pre-Trump era as a key factor behind this significant switch of corporate sentiments.
To compile its data, the researchers carried out a series of structured interviews with executives in a cross-section of Willis Towers Watson client companies.
Interview subjects included senior figures at a variety of big-brand multinationals and their emerging-markets counterparts, as well as leaders of more domestically focused firms.
Some 89% of the contributors feel that political risks across the board are increasing.
“A dramatic sign of the changing times,” says the report, “was that the US had the most mentions as the global country or region where political risk was rising. Many panellists mentioned the unpredictability of US policy.
“One executive took the view that the US ‘is withdrawing from the world stage’, which is creating challenges for corporate strategic planning and supply chains. For instance, if one’s Asia headquarters is centred in Singapore, ‘is that still a wise decision if the US approach to the region may be changing?’”
Even the most frequently mentioned, specific threat has an American dimension: the wave of sanctions that the US has imposed upon Russia.
“Of course, risks from sanctions policy are nothing new for companies that do business globally,” the report points out – but stresses: “The twist in this case is the possibility of Russian retaliation and the implications for the US-Russia relationship, which elevates this regional risk into a top global concern.”
Other oft-mentioned geopolitical threats, says the report, were of a more conventional nature, such as regional tensions in the Middle East.
However, it noted: “the nature of the threat in the Middle East is evolving and impacting companies in new ways. As proxy conflicts heat up in Iraq and Libya, Middle Eastern countries are increasingly choosing sides.
“As a panellist from the energy sector put it, ‘an “Arab Cold War” has emerged following the Arab Spring – countries are picking sides and companies may be forced to do so as well.”
A number of panellists also cited the ongoing standoff between Saudi Arabia and Qatar – which we covered in July – as a potential trigger for near-term, political risk losses.
A surprising item in the list of most-mentioned threats, the report noted, was cyberattacks – not typically considered a traditional source of political risk, but moving centre stage in the wake of suspected state sponsorship of hacking and malware.
One panellist in the food and beverages industry said, “We were impacted by the NotPetya ransomware attack, which started in the Ukraine.”