We are living in a multipolar world of economic interconnection and geopolitical fragmentation – one in which, for the past few years, businesses have faced a high level of crisis complexity, and 2024 looks set to be no different.

From the strained relationship between the US and China, and Russia’s invasion of Ukraine, to, more recently, conflict in the Middle East, geopolitical tension threatens international co-operation on many of the most pressing issues of the day, exacerbating an already overwhelming array of risks.

In its annual forecast of business threats, Control Risks cites geopolitical competition and localisation as two of the major trends anticipated to shape global business in 2024, as the former forces capital to take sides; and the latter demands that companies change the way they do business.

The group refers to this dynamic, which is laden with both risk and opportunity, as ‘the great realignment’.

Companies that get ahead of this geopolitical realignment will be the most resilient to shocks, wars and unrest, according to the forecast, whilst those that find a way to localise their operations will be more successful, as well as more compliant – a trend that chief executive officer of Control Risks, Nick Allan, notes has been building for some time. “Sweeping global narratives are often less use than granular, local understanding,” he explains. “Localisation is the currency of the great realignment.”

In addition to this dual trend, climate disruption, threats to digital integrity, and a general ‘crisis overload’ are anticipated by Allan to test the resilience of risk management functions at a new level as we move through 2024.

The disruption brought about by climate change will be the principal threat multiplier in the coming year, as climate events lead chiefly to supply chain disruptions and migration, exacerbating conflict, political instability and economic protectionism in their wake.

As world leaders convene in Dubai for COP 28, the climate crisis message is louder and clearer than ever before.

“According to the UN, the past eight years were the warmest ever recorded globally, and evidence suggests that 2024 will be no different,” Allan states. “This makes the confluence of simultaneous weather developments around the world increasingly likely, with the potential to dramatically impact the business environment. Operational risk levels will be higher than ever. The need for many businesses to catch up on their climate adaptation needs has never been more pressing.”

Rounding out its top risks for the coming year, Control Risks highlights the wide-ranging series of threats associated with artificial intelligence. The group portends cyber attacks enabled by, and targeting, AI systems, a reduction in human intervention in the digital ecosystem, and complexity resulting from regulatory developments across the AI sphere worldwide.

All in all, it’s a less than cheery outlook for risk management professionals, as the feedback
loop between drivers of disruption and the disruption they cause intensifies, as economic pressure and extreme weather events feed into more disruptive elections, state fragility, conflict, mutating cyber, digital and physical risks, geopolitical realignment and mushrooming regulation.

Risk management functions everywhere will be under extreme pressure to perform in the face of increased expectations from boards, customers and colleagues.

This will be harder still for those facing cost-cutting exercises at just the wrong time.



This article was published in the Q4 2023 issue of CIR Magazine.

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