So, what foreseen and unforeseen events might be coming down the pike over
the next year and decade?
The Environment
The impact of climate change on nations throughout the world has been
present for all to see for some time, but it is now beginning to have sustained
and serious consequences. The Organisation for Economic Co-operation and
Development has predicted that if climate change continues unabated, by 2070,
many of the world's largest coastal cities may be underwater. That includes
many of its financial centers.
Category 5 hurricanes have become more frequent, affecting landmasses with
greater regularity. Commonplace weather patterns have been disrupted so that
drought and flooding have become regularized in places unaccustomed to it. The
coming decade will be critical in terms of our ability to turn it around, but
the pace at which governments are taking (or not taking) action is worrisome.
Regrettably, it will probably take decades for governments to take truly
meaningful action. This risk should be at the top of the list for 2020 and
beyond.
Artificial Intelligence (AI)
The race for AI supremacy between China and the United States will continue
unabated, but China is in the process of sprinting ahead, spending up to $150
billion by 2030 on research, development, and talent acquisition. By contrast,
the US government is spending a paltry sum. China also has the advantage of
melding its private and public sectors together to combine resources, while the
two sectors remain separate and distinct in the United States.
October's impressive display of AI-driven military hardware during the
70th anniversary celebration of the Chinese Communist Party put the world on
notice that Beijing is already a power to be reckoned with in this sphere. If
the United States (and other Western nations) fail to devote substantially more
resources to the AI race soon, China appears destined to take and maintain the
lead.
Politics
As of today, despite all the hoopla, sensationalism, and controversy caused
by President Donald Trump, the presidential race remains his race to lose,
mostly because the Democrats seem determined to place a candidate from the far
left to run against him. If that happens, he will win, and he may well win even
if the Democrats put a moderate up against him, should the economy remain on
firm ground. Should Mr. Trump win again, the world can expect more
Twitter-induced turmoil, and America can expect to lose what little moral
authority it has left in the world.
Elsewhere, do not expect Narendra Modi, Mr. Putin, or Xi Jinping to be
knocked off of their pedestals, but do expect turmoil to continue throughout
Latin America, Iran, Iraq, and the various regional wars that continue to rage
(such as in Afghanistan, Iraq, Syria, and Yemen). None of these are likely to
end any time soon. The prospect that one or more new wars may erupt looms
large, particularly between Iran and Saudi Arabia, should the right trigger
emerge.
But, despite increased tension between a number of countries—including China
and the United States, and Japan and South Korea—the risk of a major war
erupting in the next year seems distant. The various costs associated with war
have risen dramatically, and their impacts linger for so many years beyond the
actual conflict that many countries are opting to find a way to avoid war.
Saudi Arabia's hesitancy to strike back at Iran following the major drone
and missile attacks on its Abqaiq oil facility in 2019 is a prime example.
The Trade War
Trump's trade war with China will linger through 2020 and quite possibly
well into the new decade. That is because neither side is particularly invested
in ending the conflict, and both sides have dug their feet in deep with
incessant nationalistic flag-waving, which has further politicized the issue
and raised the stakes even further. In addition, producers and consumers on
both sides have already found alternative sources to sell and purchase their
goods. That is likely to become a semi-permanent aspect of this trade war,
which makes incentivizing either side to do more to reach a swift conclusion
difficult to achieve.
Terrorism
The death of Al Baghdadi of the Islamic State of Iraq and Syria (ISIS)
prompted a slew of warnings about pending attacks on the West that have yet to
materialize. That threat will linger well into the new year, but with greater
potential urgency. The reason is that virtual jihad—being waged by followers of
ISIS, al Qaeda, and other extremist groups online—continues unabated by
millions of individuals throughout the world.
It is also true that new havens for extremists have emerged, particularly in
parts of Africa and Asia, in failed or failing states with porous borders and
few resources to combat them. Prime examples here include Burkina Faso and
Mali, where extremists launch weekly attacks (which rarely make the news in the
West) and have begun to spread their attacks in neighboring countries. It is
only a question of time until they are successful in launching reprisal
attacks.
Recession
The United States is well past its due date for another recession, but the
cycle has been thrown off-kilter because of the depth of the 2009 recession and
the market's refusal to act in a historically normal manner. The
market's propensity to essentially ignore bad news and double down on good
news is a worrisome trend that shows no sign of changing anytime soon. Global
and US growth are good enough that most economists are not particularly
alarmed, and it helps that the world has been able to avoid economic,
political, military, or other calamities with global impact over the past
decade.
History tells us that this cannot last, and it will not. Eventually, the US
economy will slip into recession, likely in 2021 or soon thereafter, after the
election has passed. And an event with global repercussions is likely to occur
in the coming decade.
Conclusion
All told, there are a plethora of looming risks on the horizon, any one of
which has potentially significant ramifications for risk managers and the
organizations they protect. It is easy to fall into the trap of believing that
all is well and there is little source of immediate concern. But all of the
risks addressed herein (and more, of course) have short- and long-term
implications. It is incumbent on risk managers to prepare for them now because
the coming decade is sure to present us with new and unforeseen challenges.
Acknowledgment
Daniel Wagner is CEO of Country Risk Solutions
and coauthor of Global Risk Agility and Decision Making. His latest
book—The America-China Divide—will be published in January 2020.