geopolitical risks 2023

Countries of concern include China, Russia, North Korea, Iran, Cuba, and Venezuela. This article discusses events including: This article also offers guidance on what investors can do to mitigate the impact of these events on their investments. Transition to net-zero, nature-positive food. Kupchan and Bremmer predict, A humiliated Russia will turn from global player into the worlds most dangerous rogue However, their scope has grown significantly in recent years with: The range of industries now covered by these measures is remarkable. Flare Director of Marketing Eric Clay had the opportunity to sit down and interview Holden on the most relevant risks facing enterprise companies in 2023. President Putin has for years weaponized Russias energy exports, especially the gas exports on which Europe has historically relied. At the start of 2023, the US and Japan announced a joint task force to improve human rights and labor standards in global supply chains and encouraged other allied nations to join this process (Press Release, Office of the U.S. Trade Representative, United States and Japan Launch Task Force to Promote Human Rights and International Labor Standards in Supply Chains (Jan. 6, 2023)). The clock is ticking and major changes are required immediately. We need to help pull the commercialization of emerging technology by drawing down the costs of these solutions through partnership and collaboration. On paper, the Russian military was much stronger than Ukraines, and many analysts feared that Kyiv was likely to fall within days of a full-scale invasion. New technologies are also evolving quickly, and with these come new vulnerabilities, which attackers some of whom have strong geopolitical motives are often swift to exploit. 21, 2022)). It's not the end of democracy (nor of NATO or the West). Almost 3.6 billion people worldwide are dangerously exposed and vulnerable to climate impacts. Some traders, refineries, shipping companies, and other businesses are also opting to voluntarily reduce their involvement in trading in Russian-sourced minerals, further exacerbating the supply chain issues and putting upward pressure on prices. For example, Russias exclusion from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) bank messaging system was often cast as a nuclear option in terms of sanctions. 117-78), which aims to bar imports of goods originating from Chinas Xinjiang Uyghur Autonomous Region, went into effect in June 2022 and has already had a significant impact on Chinese imports and the US solar energy industry. Because without these specific resources the transition is likely to become unfeasible and unlikely to accomplish. WebRISKMAP 2023 The forecast of risk ratings for every country in the world Download the map Africa The forecast of risk ratings for sub-Saharan Africa Americas The forecast of political and security risk for the US, Canada and Latin America Asia Pacific The forecast of risk ratings for the Asia Pacific region Europe Currently, space seems to Six steps to mitigating geopolitical risk Source: Oliver Wyman Analysis For the full version report, please click the PDF below. The linking of interventionist economic policy with national security ties into a broader shift in the role of government as an economic policy actor. The North Atlantic Treaty Organization (NATO) wasand remainsa military alliance of mainly the U.S. and Western European powers. Exposed vulnerabilities in global supply chains, including critical raw materials. 2023 Set for Disruption as Geopolitical Shifts and the Rising Cost-Of-Living Puts Many Organisations in Perma-Crisis Mode. Technology in 2023 is set to bring increased connectivity, precision, and agility, particularly in the areas of green tech, adaptive AI and quantum computing. While technology and renewables offer solutions, these need to be scaled up. Governments are also focusing on outbound investment amid concerns that capital from financial institutions, pensions, and private equity funds is financing the growth of strategically important sectors in competitor nations. Manufacturers design products so all materials can easily be reused with low to no waste therefore minimizing harm to the planet. Russias full-scale and brutal invasion of Ukraine was the most disruptive geopolitical event of 2022 and the gravest political and security challenge in Europe since the end of the Second World War. There is widespread understanding, however, that China has sought to privately constrain Putins actions and prevent further escalation of the conflict, but the overall consequence of the war has been to generate another point of tension in Chinas bilateral relations with countries such as the US. A coronation in China and political upheaval across the democratic world. WebRiskBusiness Services Limited 2023, Under pressure: the growing impact of geopolitical risk This time last year, with Covid restrictions lifted in most areas and the global pandemic still visible in the metaphorical rearview mirror, firms were optimistic about the year ahead. Although several countries, led by the US, sought to deter Russian aggression with threats of sanctions before the wars outbreak, the initial response appeared lackluster given some governments concerns about the effects of broad sanctions on their own economies. Geopolitical Risk Analyzing political and policy impact on market outcomes, business and operating environments. In January 2023, he announced that the Mexican government intends to renegotiate previously granted concession agreements with private companies for lithium exploration. Saudi-Iran Deal Offers Oil Markets Stability 17 Mar 2023 Issue: 66 / 11 By: Jamie Ingram In a market where concerns over tight global spare oil output capacity remain prominent, the planned restoration of diplomatic relations between Iran and Saudi Arabia is a significant stabilizing development. Check out our full webinar recording, Threat Intelligence & Geopolitical Risk in 2023, and/or keep reading for the highlights. 16 Feb 2023 EY Digital Audit CFOs can look to tax functions to help navigate economic uncertainty 17 Feb 2023 Tax Open country language switcher One key area often overlooked by companies is geopolitical risk, which poses a central threat to all businesses by disrupting international relations, trade, and supply chains worldwide. While there were signs that Russia was not a reliable partner, relatively cheap Russian oil and gas made many countries reluctant to diversify their energy supplies and reduce these imports given the potential impact of higher energy and other costs on their citizens and businesses. The North Atlantic Treaty Organization (NATO) wasand remainsa military alliance of mainly the U.S. and Western European powers. Russias experience is almost certain to be watched closely in Beijing and perhaps will engender caution against further escalation. Fernando Gomez, Head of Industry Communities, Energy, Materials and Infrastructure Platform. Have any questions? While some investors started developing strategies to address these changes, many others viewed them as temporary obstacles caused (or exacerbated) by the COVID-19 pandemic and assumed a quick return to normalcy. Turning Threat Intelligence into Effective Business Decisions Even the large-scale government support for failing financial institutions and other businesses during the financial crisis of 2008 and 2009 was largely seen as a temporary measure to stabilize markets. 2. L. 117-167). Under President Vladimir Putin, Russia has shown varying degrees of aggression to neighboring states for over a decade, from cyberattacks against Estonia in 2007 to the annexation of Crimea and parts of eastern Ukraine in 2014 (see Reuters, Timeline: Political Crisis in Ukraine and Russias Occupation of Crimea (Mar. Its a situation where different risks collide and their interdependency is acutely felt. Concerns have also been raised about the capacity of several governments in Africa, Latin America, and elsewhere to service their debt payments in 2023 amid ongoing economic pressures. Flare Director of Marketing Eric Clay had the opportunity to sit down and interview Holden on the most relevant risks facing enterprise companies in 2023. There are three basic types of geopolitical risk: event risk, In August 2022, President Andrs Manuel Lpez Obrador issued a decree establishing a new state-owned company, Litio para Mexico, creating a monopoly on lithium mining and processing in Mexico (Reuters, Mexico Creates State-Run Lithium Company, to Go Live Within 6 Months (Aug. 24, 2022)). The same polling found that a majority of current Conservative Party voters favor renationalization even though it was the UKs Conservative government in the 1980s that undertook the original privatization program. It requires a focus on tackling non-economic barriers like permitting and fast-tracking approvals. More View all Sibylline jobs London jobs Security Analyst jobs in London Russia Cutting Off Gas to Europe. It is beneficial for organisations to look to use accurate, timely intelligence to support employees impacted by cost-of-living pressures, geopolitical risks, and rising unrest in some regions around the world. President Biden is also considering taking executive action to implement these changes (see The White House, National Security Strategy (Oct. 12, 2022)). Company boards should prepare for the 2023 proxy season by understanding the mechanics of the new Francis J. Aquila, Sullivan & Cromwell LLP. This year, Congress may debate the National Critical Capabilities Defense Act of 2022, which mandates some outbound investment screening of investments (including equity and loans) in foreign entities of concern in sectors with national security implications, including biotechnology, microelectronics, and critical minerals. An assessment of trade policy with China cannot be decoupled from geopolitics, and companies and investors cannot assume that economic interests will be given more importance than national security interests. Saudi Aramco CEO Amin Nasser is optimistic that improving bilateral Iran-Saudi relations will have a positive impact on global oil markets. WebThe Top Geopolitical Risks and Trends of 2022 In 2022 the United States will be challenged by increasing pressure from the disruptive power of technology, climate Renewed tensions in the East China Sea and the implications for both Taiwans crucial role in the manufacture of semiconductors and global trading relationships with China, more generally. Investing in healthy soils and innovation for decarbonizing food value-chains, will create carbon sinks, improve nutrient density, reduce food losses, and boost jobs and livelihoods of farmers, especially 500 million smallholders, who are on the frontlines of this crisis but they need support to transition to climate-smart approaches through aligned incentives, radical policy measures, tailored risk models and credit services, supply chain procurement and market demand. Leadership Inst., Yale CELI List of Companies Leaving and Staying in Russia (last updated Jan. 23, 2023)). Blocks More Than 1,000 Solar Shipments over Chinese Slave Labor Concerns, Congress Passes and President Signs into Law the Uyghur Forced Labor Prevention Act, United States and Japan Launch Task Force to Promote Human Rights and International Labor Standards in Supply Chains, Environmental, Social, and Governance (ESG): Overview, Establishing a Business in China: Overview, Inflation Reduction Act: Key Energy Provisions, German Economy Ministry Calls for Joint EU response to U.S. Inflation Act, Why EU Leaders Are Upset over Bidens Inflation Reduction Act, EU to Prepare Law to Help its Green Industry, Back it with Cash, Mexico Creates State-Run Lithium Company, to Go Live Within 6 Months, Explainer: How Sri Lanka Spiraled into Crisis, Support for Bringing Energy Companies Back into Public Ownership, Managing Supply Chain Disruptions in a Crisis, CBP Enforcement of the Forced Labor Import Prohibition, Cross-Border Lending: Preliminary Considerations Checklist. In 2022, the world witnessed some of the most disruptive political and security events in decades, but the circumstances behind many of them arose years or even decades earlier. The prolonged cryptocurrency market turmoil has triggered several high-profile bankruptcies, and Darren Azman and Gregg Steinman, McDermott Will & Emery LLP. Inflation in food and energy prices, linked in part to the war in Ukraine, has resulted in further increases in public spending to support affected households and businesses. (For more on these sanctions, see US Sanctions and Export Controls on Russia: Tracker and Russia Sanctions and Related Considerations Toolkit on Practical Law.). While the war in Ukraine was the most immediate geopolitical event to which investors and companies had to respond in 2022, they also had to continue mitigating the challenges associated with a longer-term geopolitical shift, namely Chinas rise as a regional and global political and military power. Probability: High; Impact: High. However, this may not be sustainable in the long term. From the security impacts of mass migration to the shut-down of societies impacting peoples abilities to work, and health consequences of climate-related disasters, the past few years have demonstrated that health is tied to the stability and prosperity of countries. Each early mover country shows how multiple actors and concurrent levers such as enterprise development, technology innovation ecosystems, blended financing, de-risking partnerships, across public, private and social sectors, interact and coordinate to enable large-scale transformation over time. (For more on these issues, see, Developing comprehensive response plans to political risk events, including media management strategies and other tools to safeguard reputation and goodwill. Eurasia Group, a New York based political risk firm, released its annual list of the top ten global risks for 2023 today (Jan 3). All that has changed, and political events now have the power to disrupt businesses in virtually any sector and any part of the world. Accounting for the impact of geopolitical shifts. The current focus on geopolitics and third-party risk offers an entry point for a wider conversation about cyber risk. Investors, companies, and their counsel must consider the geopolitical risk landscape in 2023 and develop strategies to mitigate these risks. By Robin Deutsch, Ben Simpfendorfer, and John McDonough. Rogue Russia. It is beyond the scope of this article to analyze the economics themselves, but investors are acutely aware that periods of economic uncertainty often lead to political disruption, which affects business and investment risk. A wide variety of other actions have been taken since February 2022 to punish Russia for the invasion. Stakeholders globally must continue to prioritize health by ensuring equitable access to care as a core part of any national agenda, and focusing on the health of the planet to shore up against and avert future health risks. These deteriorating economic conditions also raise the risk of sovereign debt defaults. While reliance on cheap Russian oil and gas may have been crucial to Europes manufacturing growth and competitiveness, it came at the risk of potentially sky-high energy prices if access to these imports was ever curtailed. Many companies, organizations and governments have begun to explore this systems-level change for business and society, but few have made strategic commitments and developed clear strategies. Carbon pricing, but also collaboration along the value chains and with governments will be critical through leadership. A Geopolitical Outlook for Investors in 2023 Recent disruptive events, such as the ongoing war in Ukraine and trade tensions with China, continue to present The past three-years of the COVID-19 pandemic exposed vulnerabilities in health systems globally and highlighted the dangers of inequalities in care not only in creating global risks for health but causing knock-on effects to geopolitical tensions and economic risks. National security motives are also evident in efforts by governments to bring important industries back into public ownership through nationalization or expropriation. Check out our full webinar recording, Threat Intelligence & Geopolitical Risk in 2023, and/or keep reading for the highlights. We are calling on organizations to embark on this circularity journey with us to decrease pressure on resource scarcity, increase resilience of industries and drastically reduce the waste from current operating models. All of this comes at a time when Chinas domestic politics are also evolving. Turning Threat Intelligence into Effective Business Decisions What are the geopolitical risks in 2023? While that initiative remains in the early stages and still does not have the support of all members, it demonstrates that more government support (in the form of loans and grants) is perceived to be the way of accelerating Europes energy transition (Reuters, EU to Prepare Law to Help its Green Industry, Back it with Cash (Jan. 17, 2022)). The US imports the majority of the semiconductors it needs from Taiwan, which produces about 65% of the worlds semiconductors and about 90% of the more advanced chips. Understanding the investment restrictions and conditions under which investors are authorized to operate and identifying any conflicts between these and the laws of their home jurisdictions to anticipate any conflicts in laws or other potential restrictions on operations. WebShailesh Kumar, Head of Global Specialty Insights Center, contributed an article for Independent Agent Magazine on the geopolitical risks to watch for in 2023. Ian Shine. Actions to deal with the risk of high inflation and economic downturn. An expert Q&A on recent trends relating to pledges of limited liability company (LLC) or limited Tarik J. Haskins, Morris, Nichols, Arsht & Tunnell LLP. Geopolitical tensions are entering the globalised economy in full force, not just in Ukraine and Taiwan but around the world. These platforms, and the leaders, networks and organizations they host, apply the findings of this report in their efforts to tackle the worlds greatest challengesmanaging risks, building resilience and using new opportunities. Mitigating Geopolitical Risks in the Supply Chain, Part One Stephen DeAngelis March 16, 2023 Eurasia Groups Chairman, Cliff Kupchan, and company President, Ian Bremmer, recently released their list of top risks to watch out for this year. Now, it is another arrow in the quiver of policies aimed at counteracting renewed interstate competition. However, a particularly harsh winter and any resulting spike in prices may still put pressure on energy supplies in these countries and prove a real test of the degree to which people can endure economic hardship in solidarity with the Ukrainians. Gas prices fell considerably in the first few weeks of January 2023, however, in the wake of a mild start to winter and reduced demand by heavy consumers of energy in the manufacturing sector. The World Economic Forum's Global Risks Report 2023 explores some of the most severe risks we may face over the next decade that include energy supply and As states increasingly view their ability to harness technologies and data as integral to national security and sovereignty, however, they are turning to the adoption of localized approaches to regulation and governance, rather than taking a global view. While the industry is aware of the imbalance of supply and demand when it comes to minerals, little is known about the risks and implications of this imbalance. As one CEO worried about economic uncertainty put it in the survey response: Act early to lower costs and protect the balance sheet so that you are stronger and leaner when the economy begins to turn more favorably.. Understanding these geopolitical dynamics thoroughly and developing strategies to adapt to them keeps investors well placed to balance risks and opportunities in a world in which disruption remains the norm. (For more on these tariffs, see Section 301 Tariffs on Imports from China and US Trade Remedies and Other Import Relief Measures on Practical Law.). Balancing these multiple dimensions and ultimately achieving net zero by 2050 relies on rapid clean power generation deployment, energy efficiency improvements and extensive use of carbon dioxide removal measures. Cyber related business continues to be an evolving risk. The overall failure of Russia to achieve its objectives at significant costs in personnel and equipment and increasing economic isolation demonstrates the associated risks that are rendered even more complex by the need for an amphibious crossing of the Taiwan Straits and the range of potential economic policy responses it evokes. Collaboration along the value chains and with governments will be critical through.... And John McDonough gas exports on which Europe has historically relied products so all can. Outcomes, business and operating environments the invasion through nationalization or expropriation planet. Changes are required immediately chains, including critical raw materials ( last updated Jan. geopolitical risks 2023, 2023 ).. With governments will be critical through leadership the linking of interventionist economic policy with national ties! 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