Geopolitics and US election top business risks in 2020

With the approach of the ‘most ideological [US] election in 40 years’, how countries safeguard themselves will heavily influence the geopolitical risk landscape for businesses in 2020, according to an annual forecast produced by specialist global risk consultancy Control Risks.

The RiskMap 2020, which outlines the top five business risks for the year ahead, claims US foreign policy is likely to be driven by domestic politics in 2020, amid the combination of the impeachment process against president Donald Trump and drama during the campaign trail.  

“Geopolitics and the US campaign trail has the greatest potential to impact FDI flows because it is central to the trajectory of this trade war with China... whatever may happen in terms or rapprochement or truces, it is clear that the US and China are locked in economic and technological conflict for the foreseeable future,” Nick Allan, CEO of Control Risks, told fDi. 

Increased FDI flows to countries such as Vietnam (which often aim to circumvent US-imposed tariffs on China), and the increased focus on using the Committee on Foreign Investment in the United States to vet Chinese investments are examples of these trade war effects, added Mr Allan.

The RiskMap 2020 identified increasing coordinated global activism as the second greatest business risk, as society has begun to demand more from businesses on issues such as environmental protection, human rights, inequality and privacy.

“There has been a big jump in sustainable investment, an increase of 34% over two years, [and] that does affect FDI. Companies are quite aware that activist involvement can quite quickly translate into regulatory environments,” said Mr Allan.

Cyber threats in 2020 are also expected to grow in prominence and increasingly become the default mechanism for retaliation in strategic conflicts between powers, according to the forecast report. Higher levels of connectivity across the globe leave businesses at risk of being caught in the crosshairs of these cyber conflicts. 

“Connected business and infrastructure is now the norm for most European enterprises, but with this connectivity comes considerable threat given the systemic nature of cyber attacks… Connected global businesses will find their enterprise resilience to the potential effects of a systemic cyber attack tested to the full in 2020,” said Jake Stratton, senior partner and head of Europe at Control Risks.

In addition to the top three risks outlined in its RiskMap2020, Control Risks also point to a projected slowdown in global economic growth and a lack of long-term strategies among global leaders as major risks.

“Mapping out business operational threats including potentially political, economic and security exposure, and understanding where vulnerabilities may lie will be fundamental to success or failure in an unpredictable 2020,” said Mr Stratton.