Global Risks

This is what CEOs around the world see as the biggest risks to business

Riot police clash with anti-government protesters during a demonstration in Sha Tin district, on China's National Day in Hong Kong, China October 1, 2019

Social instability - as seen today in Hong Kong SAR - is one of the top-10 risks as identified by business leaders Image: REUTERS/Jorge Silva

Richard Smith-Bingham
Executive Director, Marsh & McLennan Advantage Insights
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One of the many points of interest in this year's Regional Risks to Doing Business Report, published today, is the clear difference between what business leaders in advanced economies are worried about, versus their counterparts in emerging-market countries.

Executives in advanced economies are most concerned about technological threats, according to the 2019 Executive Opinion Survey, which forms part of the report. The perennial prominence of cyber-related risks is unsurprising given the evolving attack vectors in development by criminals and state-sponsored actors at a time when companies are more exposed due to digital business models, dependencies on the cloud, and extensive supplier access to their IT systems.

Cyberattacks not only remained the number-one risk for businesses in the US, Canada, the UK and Germany, but also edged out all other risks in France and Italy to occupy the top spot for the first time.

At the same time, business leaders were also mindful of a broader range of technological risks. This shift is most dramatic in the US – where critical information infrastructure breakdown and misuse of technology jumped 15 and 16 places respectively – and these concerns also saw significant growth in Germany and Italy. Issues such as the gradual balkanization of the internet, the continued proliferation of fake news, emerging plans for the widespread deployment of cryptocurrencies, and confusion in the rollout of 5G networks likely underpin these steep climbs.

Earlier optimism about continued global growth has been replaced by anxiety about a sudden downturn, the impacts of which may be exacerbated by the lengthy period of cheap money and the still-unsatisfactory state of public sector balance sheets. The spectre of sudden asset-price decline haunts business leaders in France and Germany, while the potential for fiscal crises is a leading concern for Australian and Japanese executives.

Confidence has been sapped by more fractious international relations thanks to more troublesome trade relations between the US and China, a further deterioration of the geopolitical situation in the Gulf, and heightened tension among North Asian economies, as well as the prospect of a disorderly Brexit.

The final cluster of risks for these executives relates to extreme weather events and natural catastrophes. These feature in the top-10 for both North American and Asia-Pacific executives, especially Japan in the case of the latter. The likelihood of an increased incidence of costly and disruptive events has brought these environmental risks into focus.

Emerging market perspectives

Business leaders in emerging market countries continue to focus on key challenges that hamper domestic economic development and, simultaneously, those that result from economic underperformance.

Mass unemployment continues to be a top issue for many executives, especially those in Sub-Saharan Africa, where economies haven’t kept pace with population growth – it came top in 21 out of 33 countries in the region. But the challenge isn’t singular to this part of the world; it’s high on the radar in countries in Latin America, the Middle East and North Africa, and South Asia too.

The absence or inadequacy of physical infrastructure also presents a key challenge. Investment shortfalls for Africa, for example, are estimated at $108 billion in 2018, while the Asian Development Bank has projected that investment in the order of $1.7 trillion per year will be needed for developing Asia over the next decade.

The combination of these economic vulnerabilities and traditionally weaker political institutions has exacerbated social instability, which features prominently. Socio-political tension arising from a longstanding low trust in government has in many countries boiled over into mass protest. While drivers and triggers may differ between nations, frustrated and angry populaces are ever more determined to take a stand.

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There is more crossover between risks faced by businesses in advanced economies and those in emerging market countries than is perhaps suggested in the list of top concerns – even if fiscal crises and energy price shocks feature in both top-10s.

Of course, executives in wealthier nations are also plagued by national governance shortcomings, and underestimate the fallout from popular discontent at their peril. How this may evolve in the event of an economic downturn is an intriguing question. Conversely, executives in emerging market countries might look over the horizon and pay greater attention to developing technological threats and environmental catastrophes, which may in due course prove highly disruptive to their ambitions, if they are not well anticipated.

All in all, the results of this year’s survey show business leaders to be grappling with a range of political and geoeconomic volatilities, whose dizzying interactions and reverberations may throw up any number of surprises and shocks. As the world races towards 2020, an ability to connect little tremors with the big picture and business implications will be a vital foundation for resilience.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Global RisksLeadershipEconomic Growth
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