Published on 10 Dec 2012 Sections

Global risk in 2013: being powerful has never been harder

From Mexican drug cartels to rebels in Yemen, what are the risks to stability in 2013? A risk consultancy concludes that the main challenge will be the pace with which local events become global.

Control Risks has produced the RiskMap 2013 – which highlights the areas across the globe which are likely to experience volatility over the next 12 months, caused by a range of factors from political uncertainty to economic instability.

The graphic below highlights some of the areas of risk.

Richard Fenning, chief executive of Control Risks, writes:

“Nothing comes to my desk that is perfectly solvable. Otherwise, someone else would have solved it,” explained US President Barack Obama to a journalist in 2012.

He said this in a moment of candour before the presidential election campaign got underway in earnest, before such frank insights are replaced by the blunt certainties required by campaigning.

He went on to explain that to be president, you need to feel comfortable about making decisions when there is a 30 to 40 per cent chance that the decision will be the wrong one.

Of all the millions of words spoken by politicians around the world, these remarks are probably the most instructive in describing the nature of modern leadership.

Barack Obama (Reuters)

‘Power has never been more difficult’

As the world’s two main powers – the United States and China – go through the process of renewing their leadership, President Obama’s comments succinctly highlight the main theme of RiskMap 2013: being powerful has never been more difficult.

The last two years have shown how susceptible a highly interconnected world is to rapid political change (the Arab Spring), economic crisis (turmoil in the eurozone) and natural disasters (the earthquake/tsunami/reactor meltdown in Japan).

These types of disturbances are not new – the world has long suffered from political, economic and natural upheaval – but the taut connectivity of supply chains and communication networks means that the velocity with which local problems become global issues has changed profoundly.

The coming year promises to compound the sense in which the best laid plans get thrown off track by both a series of major economic and political challenges, and by clusters of seemingly unforeseeable events.

In describing some of the fault lines that are likely to run through the world in 2013, it is easy to sink into a trough of despondency at the number of major political, security and economic challenges we face.

Caught in a maelstrom

Seeing risk is easier than finding opportunity, and that is what consumes business leaders confronted by the sheer volume of conflicting opinion and confused data about what is happening in the world and in their business.

Arab Spring in Yemen (Reuters)

Add in the demands of tighter but sometimes contradictory regulation and a rise in aggravated shareholder activism, and you can see why global CEOs often talk of being caught in a maelstrom. This sense of unease is only heightened by the asymmetric threat from cyber-attacks and the vulnerability of data-dependent organisations unable to patrol their virtual perimeters effectively.

Many companies find themselves managing their affairs on twin tracks. On the one hand, they have teams of their best people aggressively seeking new opportunities in complex and opaque new markets, while separately they are devoting ever greater resources to avoiding reputational or governance crises.

Abundant with opportunity

The result can be paralysis by risk management, whereby the organisation – gripped by existential angst – fails to find the right degree of creative tension between the two imperatives of risk reduction and risk taking.

However, contrary to the pessimistic tone of much news reporting, there are numerous examples of markets abundant with opportunity: Colombia, Myanmar, Indonesia and much of sub-Saharan Africa, for example.

It is hard to imagine that the Chinese and US leaders taking office in 2013 do not occasionally wake up in the middle of the night and wish they were doing something else. Maybe not: it is probably in the nature of political ambition to eradicate those agitated moments of self-doubt.

But even if they sleep soundly in their beds, the challenges they face are significant, not because the world is more at risk than ever before, but because the pace of events and the speed with which the local becomes global is unprecedented.