The year 2020 was a nightmare for many risk managers. The COVID-19 pandemic,
political turmoil in the United States, and global economic malaise combined to
create a perfect storm.
Beyond that, the paradigm shift that COVID-19 created in terms of online
purchasing trends, real estate sales, the travel slump, and a host of other
changes in the way businesses, nations, and the world function has meant that
the risk manager's job became much more complicated and difficult to get
right. It would be nice to believe that the pending change in American
leadership and imminent arrival of vaccines imply that next year promises to be
less challenging, but that is not the case.
COVID-19
Next year will, in all likelihood, see the approval, production, and
distribution of multiple highly effective vaccines. However, it will take
months—if not years—for the United States and the rest of the world to
inoculate 70 percent or more of national populations, which is what is broadly
agreed to be required to achieve herd immunity. This will be a herculean
logistical task, made more challenging because the vaccines will not be 100
percent effective, many people will choose not to take a vaccine, and we can
anticipate setbacks in their ultimate effectiveness.
While there is a genuine reason for optimism in the new year, and 2021 may
not prove to be as destructive to national and human lives, healthcare systems,
and the global economy as 2020 was, we still have a long way to go before
reaching a stage where we can breathe a genuine collective sigh of relief. That
may not occur for several more years.
The Biden Presidency
President-elect Joe Biden has an enormous task on his hands, transitioning
from the Donald Trump era to a more conventional approach to domestic and
foreign policy. Few doubt his personal ability to achieve many of the broader
issues at stake, but he will presumably be presiding over a divided Congress
and will undoubtedly experience significant pushback to reversing many of Mr.
Trump's policies. Furthermore, it appears that America is now permanently
divided along partisan lines and the American people may be more divided than
at any time since the Civil War.
This implies that Mr. Biden will only be partially successful in turning the
ship next year, which will raise questions among America's allies about
just how "conventional" American foreign policy will be in the near
term. America's reputation around the world risks being permanently damaged
if the Biden administration cannot deliver in terms of repairing the
country's bilateral relationships and reestablishing its role as the
world's leading power.
Congress
With a divided Congress, battle lines firmly drawn, and the possibility of
Mr. Trump remaining in the background and continuing to fan the flames of
partisanship, Mr. Biden and the Democrats should not expect anything
approaching genuine bipartisanship with the Republicans for the next 2–4 years.
Given that Nancy Pelosi and Mitch McConnell remain at the helm of their party
leadership, there is also little hope for achieving real reform within either
party.
What they both badly need is new blood with fresh ideas and an
unconventional approach to governing. Neither will be getting that anytime
soon, so expect more gridlock, which will make many attempts that the Biden
administration will make toward implementing wholesale change elusive.
China
The path that Mr. Trump has sent America down vis-à-vis China is now set.
The gloves have been off between them for years now, and there is little reason
to believe that just because there's a new sheriff in town that either
American lawmakers or the Chinese government are inclined to think
substantially differently about each other. Of course, they would both like the
bilateral relationship to improve, but any improvement is likelier to occur in
incremental steps and over a period of years, rather than months.
Both countries' governments see the other as the most important and
consequential bilateral relationship either have, but they are, first and
foremost, competitors. That will not change during the Biden era.
Global Politics
Mr. Trump may be officially gone from the global political scene in 2021,
which will temper down the impact of his rhetoric, but that does not mean that
international relations will suddenly be peaceful or problem-free. New or
renewed conflicts arose in the fourth quarter of 2020—such as between
Azerbaijan and Armenia, Morocco and Western Sahara, and
Ethiopia/Tigray/Eritrea.
While, as noted above, some improvement in the bilateral relationship may be
expected between the United States and China, a countervailing deterioration in
relations may be expected with Russia and other countries where Mr. Trump had a
particularly strong relationship. That could impact business operations around
the world in unforeseen ways.
Cyber Security
America continues to make some progress in strengthening its cyber-security
protocols in business and on a national level. The success of the US
presidential election in preventing cyber intrusions was a stark contrast to
the 2016 experience, but the level of attempted and successful intrusions
continues to rise. The recently disclosed breach involving the SolarWinds Orion
system along with numerous successful ransomware attacks on US hospitals in
October 2020 are reminders that the threat is ever-present.
As hackers become even more resourceful, the stakes will continue to rise,
and it is, unfortunately, the case that many of them will be successful. No
risk manager can afford to let down his or her guard. If your business has not
already doubled down on cyber security, the hope of an economic revival in 2021
is a good reason to do so.
Conclusion
In short, 2021 promises to be nearly as challenging in some respects as 2020
was, and new challenges will arise. The difference is that America will have a
more stable and predictable force guiding the ship, our alliances should be
much improved in 4 years, relations with China should get better, and America
will rejoin many of the treaties that were terminated under Mr. Trump. It
remains to be seen whether relations with Iran and North Korea will
meaningfully improve or whether the American economy grows as it did between
2017 and 2019. Risk managers will need to maintain a defensive stance for the
foreseeable future. Better keep those boxing gloves on.
Daniel Wagner is CEO of Country Risk Solutions and a widely published
author on risk management and current affairs. His most recent book is The
Chinese Vortex.