The Global Business Risk Report Q2 2019: Ten Key Global Risks for Businesses

Must Read

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...

Owo Arugbo: Ekiti Begins N20,000 Payment To The Elderly As Monthly Stipend For Social Security Scheme

Ekiti State Governor, Dr Kayode Fayemi on Wednesday re-launched the social security Scheme for elderly citizens in the state with,...

PZ Cussons commences entries for Cussons Baby Moments’ 6th season

PZ Cussons has announced the commencement of entries of the 6th season of its eponymous baby competition in Nigeria tagged...
- Advertisement -
- Advertisement -

The Dun & Bradstreet Global Business Risk Report (GBRR, formerly the Global Risk Matrix) ranks the biggest threats to business based on each risk scenario’s potential impact on companies, assigning a score to each risk. The scores from the top ten risks are used to calculate an overall Global Business Impact (GBI) score.

The latest GBI score highlights a fifth successive worsening in the outlook for cross-border businesses, taking the risk to its highest-ever level and significantly above the long-term average.

Risks at the record level

Dun & Bradstreet’s GBI score has worsened for a fifth successive quarter, increasing from 279 (out of a maximum 1,000) in Q1 2019 to 308 in Q2 2019, indicating a serious deterioration in the global business operating environment. The Q2 score is the highest since the measure was launched in Q3 2013, and is well above the long-term average (252.4). It also shows that there has been a significant worsening in business risk since Q1 2018 – when a record low of 219 was recorded.

Our top ten risks combine an assessment of (i) the magnitude of the event’s probable effect on the global business operating environment, on a scale of 1 to 5 (where 1 is the smallest impact and 5 is the largest); and (ii) the likelihood of the event happening.

Three new risks in the global top ten

Highlighting the ever-evolving global environment, there are three new entries in our Q2 2019 GBRR’s top ten: one from each of West and Central Europe, North America and the Pan-Regional categories.

The three new-entry risks are:

  1. Labour scarcity and anti-immigration policies lead to a drop in long-term EU growth potentials, undermining global business opportunities. (GBI 30, out of a maximum 100);
  2. Peak rates in the US have been reached for the current expansion, leading to an inflection in the credit cycle and eventually the US business cycle; in turn, impacting global prospects (GBI of 30); and
  3. US-Iranian tensions lead to actual military conflict between the countries, with the closure of the Persian Gulf to oil tankers, leading to oil prices going over USD150/b. (GBI of 25);

Among the pre-existing risks in the top ten, five are unchanged, while two GBI scores have deteriorated. Overall, risks have narrowed in terms of categories with two from North America, and three from West and Central Europe, highlighting the importance of these regions to the global business environment, while the remainder is in the pan-regional classification. In terms of typology, risks remain diverse and are associated with trade, politics, economic developments, new technology and climate change. This reinforces the fact that finance, procurement and supply chain teams across all business sectors need to combat the impacts of an increasingly complex and globalised world.

Trade risks still the worst

As in the two previous reports, trade risks continue to dominate in our Q2 2019 GBRR, increasing levels of risk for cross-border business, supply chains and business profitability; three of our top ten risks are associated with trade, with two in the first two places. In the first place, with a GBI of 50 (up from 36 in both our Q1 2019 report and the previous one) is our concern that US tariffs hit profits and tax revenues in China as the trade war stalemates, with the likelihood having increased to 62.5%. Contagion from bad debts then triggers a rapid slowdown, overwhelming policy moves to stabilise the economy, with a consequent negative impact on global growth.

Read:  #ACTtoProtect: UN Introduce new campaign to protect children affected by conflict

The second trade-related risk is that negotiations fail to stop a US-China trade war, which spirals, with negative secondary effects offsetting new opportunities and cooling global trade growth. This risk is in second place with a GBI of 35 (the same as in the previous report). The third trade-related risk is that the UK leaves the EU in a disorderly manner, disrupting supply chains – primarily in Europe, but also globally. This event is in seventh place, with a GBI of 27, up from 24 in the previous report.

Read:  Ikea's frugal billionaire founder Ingvar Kamprad dies aged 91

Political factors also important

The highest new entry in the Q2 2019 GBRR is in equal third place, with a GBI of 30. This is our concern that labour scarcity and anti-immigration policies lead to a drop in long-term EU growth potentials, undermining global business opportunities. Also, in equal third place with the same GBI score of 30 as in the previous report and emanating from West and Central Europe is a second politics-related risk. This one refers to European elections at the end of May ending with strong gains for anti-EU parties, complicating policy-making within the EU and undermining the business environment.

The final political risk is that current US-Iranian tensions lead to actual military conflict between the countries, with the closure of the Persian Gulf to oil tankers, leading to oil prices escalating sharply to over USD150/b with consequent negative impacts for businesses and cross-border trade. This risk has a GBI of 25, is in equal ninth place, and is a new entry in the top ten.

Economic concern

Only one purely economic risk features in this quarter’s GBRR. In equal third place, with a GBI of 30 (the same as in the previous report), and a new entry emanating from North America is the concern that peak rates in the US have been reached for the current expansion, leading to an inflection the credit cycle and eventually the US business cycle; in turn, impacting global prospects.

Other factors

The final three factors are pan-regional; two are related to climate and the third to technological developments. In equal third place overall, with a GBI of 30 (the same as in the previous report) is our concern that the rapidly growing problem of cyber-dependence and connectivity will lead to more frequent and more damaging cyber-security issues, with ramifications for doing business.

In eighth place overall, with a GBI of 26 (the same as in the previous report) is the first climatic risk. Specifically, we are concerned that jetstream instability continues to create persistent, anomalous weather patterns across the Northern Hemisphere, increasing costs for the public and businesses alike. Finally, in equal ninth place, and with a GBI of 25 (the same as the previous report) is the risk that the hazards forecast by the Intergovernmental Panel on Climate Change (related to ecosystems and extreme weather events) materialise much faster than the consensus view anticipates, creating systemic impacts at the global level.

Summary: Business environment risk at record levels

Dun & Bradstreet’s Global Business Impact score for Q2 2019 shows that the risks confronting businesses have worsened for a fifth consecutive quarter, to reach the highest level on record; in contrast, the record-low score was recorded just five quarters ago, in Q1 2018. The Q2 2019 score highlights that business decision-makers still need to monitor the global business environment continually and carefully ahead of the expected slowdown in the global economy (and despite a solid – if unspectacular – recovery from the 2008-09 recession). The geographical spread and diversity of risks related to trade, politics, economic developments, new technology, and climate make the business environment increasingly challenging.

Read:  Igbaroola V. FIRS & 4 ORS.: FHC Confirms the Supremacy Of The CITN Act With Regards To The Regulation Of The Tax Profession In Nigeria

Top Ten Economic Risks Q2 2019

RankingRegionRiskLikelihood of Event (%)Global Impact (1-5)Global Business Impact Score (1-100)
1North AmericaIn China, US tariffs hit profits and tax revenues as the trade war stalemates. Contagion from bad debts then triggers a rapid slowdown, overwhelming policy steps to stabilise the economy, with a consequent negative impact on global growth.62.5450
2Pan-regionalNegotiations fail to stop a US-China trade war, which spirals with negative secondary effects offsetting new opportunities and cooling global trade growth.702.535
=3West & Central EuropeEuropean elections in May end with strong gains for anti-EU parties, complicating policy-making at the EU level and undermining the business environment.75230
=3West & Central EuropeLabour scarcity and anti-immigration policies lead to a drop in long-term EU growth potentials, undermining global business opportunities.75230
=3North AmericaPeak rates in the US have been reached for the current expansion, leading to a turn in the credit cycle and eventually the US business cycle; in turn, impacting global prospects.50330
=3Pan-regionalRapidly growing cyber-dependence and connectivity lead to increasingly frequent and more damaging cyber incidents, with global ramifications.75230
7West & Central EuropeThe UK leaves the EU in a disorderly way, thereby causing global supply chain disruptions.45327
8Pan-regionalJetstream instability continues to create persistent, anomalous weather patterns across the Northern Hemisphere, increasing costs to the public and businesses.65226
=9Pan-regionalUS-Iranian tensions lead to actual military conflict between the countries, with the closure of the Persian Gulf to oil tankers, leading to oil prices going over USD150/b.25525
=9Pan-regionalRisks forecast by the Inter-governmental Panel on Climate Change to ecosystems, and from extreme weather events, creating systemic impacts at the global level, materialise much faster than anticipated in the consensus view.502.525
Asia-PacificChina fails to defend the CNY7:USD level, prompting a surprise devaluation that shocks financial markets and triggers several emerging market crises.353.222.4
11East Europe & Central AsiaFundamental long-term re-alignment of energy co-operation between Russia and Europe – risks exacerbated by the West’s over-reliance on Russian energy and threats from Nord Stream 235321
12West & Central EuropeAngela Merkel’s term as chancellor is cut short as her coalition government collapses over poor election results creating uncertainty in Germany and the wider EU.35321
13Pan-regionalGlobal tech sector valuations and fintech investment collapse in the context of unexpected national security barriers to supply chains, trade and investment, as country risk factors return.25420
Read:  Igbaroola V. FIRS & 4 ORS.: FHC Confirms the Supremacy Of The CITN Act With Regards To The Regulation Of The Tax Profession In Nigeria
- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

Ensurity Technologies joins the Microsoft Intelligent Security Association

HYDERABAD, INDIA - Media OutReach - 17 October 2019 - Ensurity Technologies, Hyderabad, India-based cybersecurity company, is pleased to announce that it has joined the...

Hospitality Disruptor Generator Acquires Freehand Hotels In Its Quest to Dominate the Experience Economy in U.S. Market

London-based Queensgate Investments finalizes $400 million purchase of Freehand Hotels from a seller consortium including The Yucaipa Companies and Sydell Group, drastically expanding Generator’s...

Sunlight Real Estate Investment Trust ("Sunlight REIT") Operational Statistics for the Quarter Ended 30 September 2019

HONG KONG, CHINA - Media OutReach - 17 October 2019 - Henderson Sunlight Asset Management Limited (the " Manager"), as manager of Sunlight Real Estate Investment Trust...

FG mulls new tax on Coke, Bigi, other soft drinks

Zainab Ahmed, the minister of finance, says the federal government is considering introducing excise duty on carbonated drinks. The minister made this known while addressing...

“Best Global Brands 2019” – Mercedes-Benz is once again the world’s most valuable luxury car brand

Mercedes-Benz further increased its brand value and is once again the world's most valuable luxury automotive brand. In the latest "Best Global Brands 2019"...

More Articles Like This