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What’s At Risk: An 18-Month View of a Post-COVID World

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What's At Risk 18 Month View of COVID-19 Risks

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What’s At Risk: An 18-Month View of a Post-COVID World

As the world continues to grapple with the effects of COVID-19, no part of society seems to be left unscathed. Fears are surmounting around the economy’s health, and dramatic changes in life as we know it are also underway.

In today’s graphic, we use data from a World Economic Forum survey of 347 risk analysts on how they rank the likelihood of major risks we face in the aftermath of the pandemic.

What are the most likely risks for the world over the next year and a half?

The Most Likely Risks

In the report, a “risk” is defined as an uncertain event or condition with the potential for significant negative impacts on various countries and industries. The 31 risks have been grouped into five major categories:

  • Economic: 10 risks
  • Societal: 9 risks
  • Geopolitical: 6 risks
  • Technological: 4 risks
  • Environmental: 2 risks

Among these, risk analysts rank economic factors high on their list, but the far-reaching impacts of the remaining factors are not to be overlooked either. Let’s dive deeper into each category.

Economic Shifts

The survey reveals that economic fallout poses the most likely threat in the near future, dominating four of the top five risks overall. With job losses felt the world over, a prolonged recession has 68.6% of experts feeling worried.

RankEconomic Risk%
#1Prolonged recession of the global economy68.6%
#2Surge in bankruptcies (big firms and SMEs) and a wave of industry consolidation56.8%
#3Failure of industries or sectors in certain countries to properly recover55.9%
#4High levels of structural unemployment (especially youth)49.3%
#6Weakening of fiscal positions in major economies45.8%
#7Protracted disruption of global supply chains42.1%
#8Economic collapse of an emerging market or developing economy38.0%
#16Sharp increase in inflation globally20.2%
#20Massive capital outflows and slowdown in foreign direct investment17.9%
#21Sharp underfunding of retirement due to pension fund devaluation17.6%

The pandemic has accelerated structural change in the global economic system, but this does not come without consequences. As central banks offer trillions of dollars worth in response packages and policies, this may inadvertently burden countries with even more debt.

Another concern is that COVID-19 is now hitting developing economies hard, critically stalling the progress they’ve been making on the world stage. For this reason, 38% of the survey respondents anticipate this may cause these markets to collapse.

Social Anxieties

High on everyone’s mind is also the possibility of another COVID-19 outbreak, despite global efforts to flatten the curve of infections.

RankSocietal Risk%
#10Another global outbreak of COVID-19 or different infectious disease30.8%
#13Governmental retention of emergency powers and/or erosion of civil liberties23.3%
#14Exacerbation of mental health issues21.9%
#15Fresh surge in inequality and social divisions21.3%
#18Anger with political leaders and distrust of government18.4%
#23Weakened capacity or collapse of national social security systems16.4%
#24Healthcare becomes prohibitively expensive or ineffective14.7%
#26Failure of education and training systems to adapt to a protracted crisis12.1%
#30Spike in anti-business sentiment3.2%

With many countries moving to reopen, a few more intertwined risks come into play. 21.3% of analysts believe social inequality will be worsened, while 16.4% predict that national social safety nets could be under pressure.

Geopolitical Troubles

Further restrictions on trade and travel movements are an alarm bell for 48.7% of risk analysts—these relationships were already fraught to begin with.

RankGeopolitical Risk%
#5Tighter restrictions on the cross-border movement of people and goods48.7%
#12Exploitation of COVID-19 crisis for geopolitical advantage24.2%
#17Humanitarian crises exacerbated by reduction in foreign aid19.6%
#22Nationalization of strategic industries in certain countries17.0%
#27Failure to support and invest in multilateral organizations for global crisis response7.8%
#31Exacerbation of long-standing military conflicts2.3%

In fact, global trade could drop sharply by 13-32% while foreign direct investment (FDI) is projected to decline by an additional 30-40% in 2020.

The drop in foreign aid could also put even more stress on existing humanitarian issues, such as food insecurity in conflict-ridden parts of the world.

Technology Overload

Technology has enabled a significant number of people to cope with the impact and spread of COVID-19. An increased dependence on digital tools has enabled wide-scale remote working for business—but for many more without this option, this accelerated adoption has hindered rather than helped.

RankTechnological Risk%
#9Cyberattacks and data fraud due to sustained shift in working patterns37.8%
#11Additional unemployment from accelerated workforce automation24.8%
#25Abrupt adoption and regulation of technologies (e.g. e-voting, telemedicine, surveillance)13.8%
#28Breakdown of IT infrastructure and networks6.9%

Over a third of the surveyed risk analysts see the emergence of cyberattacks due to remote working as a rising concern. Another near 25% see the threat of rapid automation as a drawback, especially for those in occupations that do not allow for remote work.

Environmental Setbacks

Last but certainly not least, COVID-19 is also potentially halting progress on climate action. While there were initial drops in pollution and emissions due to lockdown, some estimate there could be a severe bounce-back effect on the environment as economies reboot.

RankEnvironmental Risk%
#19Higher risk of failing to invest enough in climate resilience and adaptation18.2%
#29Sharp erosion of global decarbonization efforts4.6%

As a result of the more immediate concerns, sustainability may take a back seat. But with environmental issues considered the biggest global risk this year, these delayed investments and missed climate targets could put the Earth further behind on action.

Which Risks Are of the Greatest Concern?

The risk analysts were also asked which of these risks they considered to be of the greatest concern for the world. The responses to this metric varied, with societal and geopolitical factors taking on more importance.

VC_What's-at-Risk-v5-supp

In particular, concerns around another disease outbreak weighed highly at 40.1%, and tighter cross-border movement came in at 34%.

On the bright side, many experts are also looking to this recovery trajectory as an opportunity for a “great reset” of our global systems.

This is a virus that doesn’t respect borders: it crosses borders. And as long as it is in full strength in any part of the world, it’s affecting everybody else. So it requires global cooperation to deal with it.

——Gita Gopinath, IMF Chief Economist

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The Biggest Business Risks in 2021

We live in an increasingly volatile world, where change is the only constant. Which are the top ten business risks to watch out for?

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The Biggest Business Risks Around the World

We live in an increasingly volatile world, where change is the only constant.

Businesses, too, face rapidly changing environments and associated risks that they need to adapt to—or risk falling behind. These can range from supply chain issues due to shipping blockages, to disruptions from natural catastrophes.

As countries and companies continue to grapple with the effects of the pandemic, nearly 3,000 risk management experts were surveyed for the Allianz Risk Barometer, uncovering the top 10 business risks that leaders must watch out for in 2021.

The Top 10 Business Risks: The Pandemic Trio Emerges

Business Interruption tops the charts consistently as the biggest business risk. This risk has slotted into the #1 spot seven times in the last decade of the survey, showing it has been on the minds of business leaders well before the pandemic began.

However, that is not to say that the pandemic hasn’t made awareness of this risk more acute. In fact, 94% of surveyed companies reported a COVID-19 related supply chain disruption in 2020.

Rank (2021)% ResponsesRisk NameBusiness Risk ExamplesChange from 2020
#141%Business InterruptionSupply chain disruptions
#240%Pandemic OutbreakHealth and workforce issues, restrictions on movement
#340%Cyber IncidentsCybercrime, IT failure/outage, data breaches, fines and penalties
#419%Market DevelopmentsVolatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation
#519%Legislation/ Regulation ChangesTrade wars and tariffs, economic sanctions, protectionism, Brexit, Euro-zone disintegration
#617%Natural CatastrophesStorm, flood, earthquake, wildfire
#716%Fire, Explosion-
#813%Macroeconomic DevelopmentsMonetary policies, austerity programs, commodity price increase, deflation, inflation
#913%Climate Change-
#1011%Political Risks And ViolencePolitical instability, war, terrorism, civil commotion, riots and looting

Note: Figures do not add to 100% as respondents could select up to three risks per industry.

Pandemic Outbreak, naturally, has climbed 15 spots to become the second-most significant business risk. Even with vaccine roll-outs, the uncontrollable spread of the virus and new variants remain a concern.

The third most prominent business risk, Cyber Incidents, are also on the rise. Global cybercrime already causes a $1 trillion drag on the economy—a 50% jump from just two years ago. In addition, the pandemic-induced rush towards digitalization leaves businesses increasingly susceptible to cyber incidents.

Other Socio-Economic Business Risks

The top three risks mentioned above are considered the “pandemic trio”, owing to their inextricable and intertwined effects on the business world. However, these next few notable business risks are also not far behind.

Globally, GDP is expected to recover by +4.4% in 2021, compared to the -4.5% contraction from 2020. These Market Developments may also see a short-term 2 percentage point increase in GDP growth estimates in the event of rapid and successful vaccination campaigns.

In the long term, however, the world will need to contend with a record of $277 trillion worth of debt, which may potentially affect these economic growth projections. Rising insolvency rates also remain a key post-COVID concern.

Persisting traditional risks such as Fires and Explosions are especially damaging for manufacturing and industry. For example, the August 2020 Beirut explosion caused $15 billion in damages.

What’s more, Political Risks And Violence have escalated in number, scale, and duration worldwide in the form of civil unrest and protests. Such disruption is often underestimated, but insured losses can add up into the billions.

No Such Thing as a Risk-Free Life

The risks that businesses face depend on a multitude of factors, from political (in)stability and growing regulations to climate change and macroeconomic shifts.

Will a post-pandemic world accentuate these global business risks even further, or will something entirely new rear its head?

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RCEP Explained: The World’s Biggest Trading Bloc Will Soon be in Asia-Pacific

The Regional Comprehensive Economic Partnership (RCEP) covers 30% of global GDP and population. Here’s everything you need to know about it.

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RCEP Explained: The World’s Biggest Trading Bloc

Trade and commerce are the lifeblood of the global economy. Naturally, agreements among nations in a certain geographical area help facilitate relationships in ways that are ideally beneficial for everyone involved.

In late 2020, the Regional Comprehensive Economic Partnership (RCEP) was signed, officially creating the biggest trade bloc in history. Here, we break down everything you need to know about it, from who’s involved to its implications.

Who’s in the RCEP, and Why Was it Created?

The RCEP is a free trade agreement between 15 nations in the Asia-Pacific region, and has been formalized after 28 rounds of discussion over eight years.

Member nations who are a part of the RCEP will benefit from lowered or completely eliminated tariffs on imported goods and services within the region in the next 20 years. Here are the countries which have signed on to be member nations:

CountryPopulation (M)Nominal GDP ($B)
🇦🇺 Australia25.7$1,359
🇧🇳 Brunei0.5$12
🇰🇭 Cambodia15.7$26
🇨🇳 China1404$14,723
🇮🇩 Indonesia270.2$1,060
🇯🇵 Japan125.8$5,049
🇰🇷 South Korea51.8$1,631
🇱🇦 Laos7.3$19
🇲🇾 Malaysia32.9$338
🇲🇲 Myanmar53.2$81
🇳🇿 New Zealand5.1$209
🇵🇭 Philippines108.8$362
🇸🇬 Singapore5.8$340
🇹🇭 Thailand69.8$502
🇻🇳 Vietnam97.4$341
RCEP Total2,274.2M$26,052B

Source: IMF

But there is still some work to do to bring the trade agreement into full effect.

Signing the agreement, the step taken in late 2020, is simply an initial show of support for the trade agreement, but now it needs to be ratified. That means these nations still have to give their consent to be legally bound to the terms within the RCEP. Once the RCEP is ratified by three-fifths of its signatories—a minimum of six ASEAN nations and three non-ASEAN nations—it will go ahead within 60 days.

So far, it’s been ratified by China, Japan, Thailand, and Singapore as of April 30, 2021. At its current pace, the RCEP is set to come into effect in early 2022 as all member nations have agreed to complete the ratification process within the year.

Interestingly, in the midst of negotiations in 2019, India pulled out of the agreement. This came after potential concerns about the trade bloc’s impacts on its industrial and agricultural sectors that affect the “lives and livelihoods of all Indians”. India retains the option to rejoin the RCEP in the future, if things change.

The Biggest Trading Blocs, Compared

When we say the Regional Comprehensive Economic Partnership is the biggest trade bloc in history, this statement is not hyperbole.

The RCEP will not only surpass existing Asia-Pacific trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in size and scope, but also other key regional partnerships in advanced economies.

This includes the European Union and the U.S.-Mexico-Canada Agreement (USMCA, formerly known as NAFTA). How does the trio stack up?

 Nominal GDP, 2020Population, 2020
EU$15.2 trillion445 million
USMCA$23.7 trillion496 million
RCEP$26.1 trillion2.27 billion
World$84.5 trillion7.64 billion

With the combined might of its 15 signatories, the RCEP accounts for approximately 30% of global GDP and population. Interestingly, the total population covered within the RCEP is near or over five times that of the other trade blocs.

Another regional agreement not covered here is the African Continental Free Trade Area (AfCFTA), which is now the largest in terms of participating countries (55 in total), but in the other metrics, the RCEP still emerges superior.

Implications of the Regional Comprehensive Economic Partnership

The potential effects of the RCEP are widespread. Among others, the agreement will establish rules for the region around:

  • Investment
  • Competition
  • E-commerce
  • Intellectual property
  • Telecommunications

However, there are some key exclusions that have raised critics’ eyebrows. These are:

  • Labor union provisions
  • Environmental protection
  • Government subsidies

The RCEP could also help China gain even more ground in its economic race against the U.S. towards becoming a global superpower.

Last, but most importantly, Brookings estimates that the potential gains from the RCEP are in the high billions: $209 billion could be added annually to world incomes, and $500 billion may be added to world trade by 2030.

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