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. 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. According to a Reuters report, as of December 2022, EU member states had filled 84% of their gas storage capacity, exceeding the target of 80%. We need to support emerging innovators. Until fairly recently, governments in many of the worlds leading economies adopted a comparatively light touch in economic policy making. Even if a negotiated settlement were agreed or Putin were toppled, neither of which has a high probability at present, Ukraine expects Russia to contribute to the hundreds of billions of dollars required for its reconstruction. WebOther key findings from Risk in Focus 2023 include the following: Changes in laws and regulations was cited as a top five risk by 44%, slightly down on the 46% that said the same a year ago. The UK enacting its National Security and Investment Act 2021. Transition to net-zero, nature-positive food. In many ways, President Biden has built on the groundwork laid by his predecessor by taking additional measures aimed at advancing economic decoupling with China. However, their scope has grown significantly in recent years with: The range of industries now covered by these measures is remarkable. Instead, they encompass broad swaths of national economies, including sectors such as critical infrastructure, personal data, health care, and national food supplies. The tensions with Ukraine changed this calculation, possibly permanently. 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. This event takes a deep dive into the shifting economic tides by exploring inflation and recession outlook, geopolitical risks impact on the global economy, labor market status and implications, and the effect of foreign tourism. McKinsey research supports this view. Findings from the BARDL approach @article{Li2023DoGR, title={Do geopolitical risk, green finance, and the rule of law affect the sustainable environment in China? While the US has not imposed sanctions directly on trade in these metals, other measures, such as the revocation of Russias MFN status, have increased the cost of these commodities. 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. 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. Recent disruptive events, such as the ongoing war in Ukraine and trade tensions with China, continue to present material investment risks. However, key events in 2022 brought certain issues into greater focus, challenging these assumptions and presenting material longer-term risks to investors. However, some tools for companies and investors to consider include: Practical Law helps you get up to speed quickly and practice with confidence. Tackling the status quo and delivering on all three dimensions of sustainability, security and affordability is, however, a daunting and highly complex task, underpinned by, and intertwined with, a multitude of challenges. Aalto Universitys Climate, Health and Cities program provides a solution-focused outlook that is beneficial to anyone interested in The Taiwan question lies at the core of Chinas political calculus, and any change in associated dynamics around Taiwan may still prompt action by China, even if inherently risky. From their opening remarks, one might conclude things are going swimmingly. This presents several risks, including reputational harm, boycotts by stakeholders, and difficulties importing needed materials to maintain operations. The Russian invasion of Ukraine has highlighted the importance of a pervasive geopolitical risk management framework for financial institutions (FIs), given the partly unexpected second and third order impacts An expert Q&A on the unique challenges women face in bankruptcy and restructuring practice and how Rachel Ehrlich Albanese, DLA Piper and Cullen Drescher Speckhart, Cooley LLP. Access the full report here, along with country, As of January 2023, the tariffs remain in place. With broad bipartisan support, this bill may gain traction even in a fractured Congress. WebShailesh Kumar, Head of Global Specialty Insights Center, contributed an article for Independent Agent Magazine on the geopolitical risks to watch for in 2023. Geopolitical and economic uncertainty around the world is exacerbating the threat of potentially catastrophic cyber attacks, increasing the risk for businesses across sectors. Together with other members of the G7, the US also revoked Russias most favored nation (MFN) import status, resulting in significantly higher tariffs on Russian exports, and imposed a price cap of $60 per barrel on seaborne Russian-origin crude oil starting on December 5, 2022. For many other nations though, this new order simply felt like a new form of colonialism. Raw materials, once scarce, are again abundant. February 23, 2023. 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. All the scenarios presented in the Global Risks Report confirm that the demand will not be met according to the global need and there is now an alarming accordance on the risks of mineral shortages: from environmental pressure on ecosystems, backlash in adopting cleaner technologies, and reduced efforts for responsible mining, to the increased competition and tension among countries as each material grows scarce. Climate-induced catastrophes and emboldened movements to mitigate and adapt to them. Sebastian Buckup, Head of Networks and Partnerships, C4IR, Businesses must move beyond compliance and engrain responsible and human-centred technology principles into their DNA. Currently, space seems to The complete rupture of many countries bilateral relations with Russia coupled with growing strains on their relations with China led many governments to conclude that their economies require realignment. 2. A cornered Russia will turn from global player into the worlds Organizations may face significant costs and penalties when they needlessly retain data, especially Martin T. Tully and Nick B. Snavely, Redgrave LLP. These and more affect the ability of societies to thrive and engage. With the war lasting longer than many initially had anticipated, the crucial issue is how the situation will evolve. 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. Tony Chaudhry | Market Bulletin Ref: Y5381 Recent geopolitical tensions have highlighted the need for sustainable, ethical and local green circular solutions, thus pushing us also to manage the risks and opportunities involved towards this transition. UpLink is an example of a platform that is enabling system disruptors and start-ups to bring in new innovative solutions and technology that shifts paradigms. 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 However, this analysis underestimated the degree to which the fighting capacity of the Ukrainian military was enhanced by eight years of NATO-led training following the eruption of conflict in eastern Ukraine in 2014. Protecting Overseas Investments: What Are the Options? Davos 2023 - Global Risks Report: The year of the polycrisis. An expert Q&A on the Federal Trade Commissions (FTCs) proposed rule banning employee Peter A. Steinmeyer and Erik Weibust, Epstein Becker & Green, P.C. However, it also marks a recognition by many governments that uncontrolled globalization in many ways conflicts with their long-term security in the current geostrategic environment and they may need to take a greater public sector role in influencing and directing industrial policy. Summary. 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 EU contemplating further reforms to its foreign investment screening mechanisms in 2023. Technology in 2023 is set to bring increased connectivity, precision, and agility, particularly in the areas of green tech, adaptive AI and quantum computing. of Excellence, 2007 Cyber Attacks on Estonia). EU raises growth forecasts, Turkey faces $85 billion in quake costs and other economy stories you need to read this week. This is one of the few policy areas that often commands bipartisan support in Congress at a time when US politics look even more fractious with the Republican Party retaking control of the House of Representatives in the 2022 midterm elections. The urgency of a cost of living crisis dominates 2023s Global Risks Report, which is in danger of deprioritizing other risks. Russias war in Ukraine and its implications for regional and global security and companies access to key commodities, such as oil, gas, and critical minerals. The Uyghur Forced Labor Prevention Act (UFLPA) (Pub. President Putin has for years weaponized Russias energy exports, especially the gas exports on which Europe has historically relied. Brewing fears of war on an even greater scale in Asia. Geopolitical tensions have been a key feature of 2022, and they are unlikely to disappear in 2023. The clock is ticking and major changes are required immediately. 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. Probability: High; Impact: High. While technology and renewables offer solutions, these need to be scaled up. All of that is now changing. 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. With Xi Jinpings appointment at the 20th Communist Party Congress to an unprecedented third term as Chinas supreme leader and with no successor identified, he is arguably now the most powerful Chinese political figure since Mao Zedong. As 2023 began, the global economy faced numerous challenges, including inflation and the risk of recession. 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. In 2023, the identified risks seem to start to materialize, but this should not be a limitation to act. 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. In 2022, US Treasury Secretary Janet Yellen and US Commerce Secretary Gina Raimondo reportedly both favored lifting some Trump administration tariffs against China as a way of easing inflation, but US Trade Representative Katherine Tai and several defense and national security policy officials argued that maintaining tariffs provided leverage in trade negotiations while also addressing broader national security objectives (see Reuters, USTR Tai Calls U.S. Tariffs on Chinese Goods Significant Leverage (June 22, 2022)). Various resources for different circular solutions will require their own unique strategies and considerations; resource circularity supports the world in redirecting away from the constant spectre of scarcity. WebShailesh Kumar, Head of Global Specialty Insights Center, contributed an article for Independent Agent Magazine on the geopolitical risks to watch for in 2023. While the key imperative for this measure is the fight against global climate change and the need to accelerate the transition to low-carbon energy, it is also driven by the desire to strengthen domestic manufacturing of key energy components and reduce reliance on China, Russia, and other countries with which the relationships may be less friendly. Discontent in Latin America. Accounting for the impact of geopolitical shifts. Certain companies that continued to operate in Russia after the outbreak of war with Ukraine faced criticism for doing so despite broader commitments to adhere to ESG principles (see, for example, Funds Europe, Allianz and Goldman Sachs Accused of Communications Moralwashing on Russia (Oct. 6. These measures have placed significant pressure on national treasuries. While progress has been made in bolstering cybersecurity awareness and preparation, there is more that businesses can do to increase resiliency, including improving cyber literacy, communication and information sharing. The US prohibited the import of certain Russian energy products and added certain Russian state-owned financial institutions and Russian elites and their families with close ties to President Putin to the Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) list. Geopolitical tensions are entering the globalised economy in full force, not just in Ukraine and Taiwan but around the world. The situation is improving, but not sufficiently swiftly for most organizations and businesses to be confident that they are equipped to address a major cyber event. State-owned assets were privatized not just in the former Communist world but also in countries such as the UK and France. The big question that emerged during 2022 and will dominate 2023 is whether the short-term urgency to keep the lights on will adversely affect long-term sustainability goals. The Forums First Movers Coalition, in partnership with John Kerry, US Special Presidential Envoy for Climate, is working across more than 67 companies in seven industries (aluminum, aviation, cement and concrete, shipping, steel, trucking and carbon dioxide removal technologies) sending a $12 billion market signal to pull forward the critical low-carbon technologies of the future. Business Continuity Risk (US): Compliance Roadmap, Investment risk assessment must consider geopolitical events, Security tensions and nationalist trade policies impact investments, Investors must implement strategies to address these issues, Strategies must be tailored to balance relevant risks and opportunities. Using internal risk teams or external geopolitical risk advisors to regularly reassess how macro-level geopolitical trends affect their underlying risk assumptions as part of board-level risk oversight. Russia Cutting Off Gas to Europe. As British households deal with rapidly rising energy prices, polling in November 2022 showed that 66% of respondents either tended to support or strongly supported renationalizing electricity and gas companies (see YouGov, Support for Bringing Energy Companies Back into Public Ownership). 2023 Set for Disruption as Geopolitical Shifts and the Rising Cost-Of-Living Puts Many Organisations in Perma-Crisis Mode. Russias ability to sustain ongoing significant losses in personnel and equipment, and the longer-term impact of this on its domestic and regional security, are open issues. Meanwhile, consumers are enabled to seamlessly reduce, reuse, repair or recycle their products, keeping them within the system. 2. Each monthly EY Geostrategic Analysis issue includes assessments of recent or upcoming political risk events and what they mean for companies across sectors and From luxury moguls to Saudi Aramco CEO Amin Nasser is optimistic that improving bilateral Iran-Saudi relations will have a positive impact on global oil markets. As Russia depletes its stocks of advanced weapons with little capacity to replenish them due to sanctions and embargoes, there is also a risk that Putin resorts to more basic and brutal methods of protracting the war, including intensifying attacks on civilian targets and infrastructure. In emerging and developing markets, we also need to address the high cost of capital. 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. The Company boards should prepare for the 2023 proxy season by understanding the mechanics of the new Francis J. Aquila, Sullivan & Cromwell LLP. 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. 5 geopolitical risk factors affecting organizations in 2023 Five global risk predictions for 2023. L. 117-169) are another example (for more information, see Inflation Reduction Act: Key Energy Provisions on Practical Law). 8, 2014) and NATO Strategic Commcns Ctr. WebEIUs Risk outlook 2023 provides a look at the economic, political and geopolitical risks facing the global operating environment, with our in-depth expert risk analysis. Shoring up Europes gas storage capacity and ensuring energy security have come at a cost as natural gas prices have increased significantly in the last year amid competition from European and Asian buyers and limited supply. stop putting their selfish geopolitical agenda above nuclear non-proliferation obligations and stop coercing the IAEA into endorsing their Have any questions? Turning Threat Intelligence into Effective Business Decisions 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 Russia is now weaker economically and militarily, and Ukrainians are more united and committed to economic and security integration with the West than at any time since their independence from the Soviet Union in 1991. A resolution appears unlikely in the short term, but, if both sides find a way to claim victory, a dtente is possible. Putin seemingly miscalculated badly when he launched the war one year ago. Geostrategic analysis March 2023 edition | EY - US Trending How the great supply chain reset is unfolding 22 Feb 2023 Consulting How can data and technology help deliver a high-quality audit? Akshay Joshi, Head of Industry and Partnerships, Centre for Cybersecurity. While the ultimate outcome of the war is unclear, one certainty is that Russias return to its pre-war levels of economic integration with the wider world looks unlikely in the short- to medium-term. Practical Law Employee Benefits & Executive Compensation. 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. 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. Chinas failure to condemn the Russian invasion serves as further evidence that it is increasingly prepared to prioritize national interests over those of the liberal international order that have underpinned international relations for much of the past few decades. The widespread protests against stringent COVID-19 restrictions that took place at the end of 2022 demonstrate, however, that the Communist Party leadership still feels a sense of vulnerability in its monopoly on power that may be tested further by its response to the wave of COVID-19 infections sweeping the country. 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. 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. Here is where our specialists see the likeliest sources of risk in 2023 across the geopolitical landscape. Latin American societies have become increasingly polarized in recent US-China conflict remains very unlikely in 2023, but competition and confrontation are moving from the trade and technology realms into the military domain. The legislation was influenced, in part, by concerns that China was gaining strategic advantages in semiconductor manufacturing that were helping to shift the geopolitical balance of power in its favor. 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. In some circumstances, where private sector companies become financially unviable, governments have taken ownership of them to maintain provision of essential services. 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. Laws providing for oversight of foreign investment on grounds of national security have existed for decades. 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. Geopolitical Risks Rogue Russia. Historically, financial goals of reducing costs and increasing profitability often outweighed broader political concerns when companies and investors assessed investment risk. Kelly McCain, Head, Healthcare Initiatives Shaping the Future of Health and Healthcare. In April 2022, Sri Lanka missed two coupon payments, leading to its first ever sovereign debt default. Weve run out of words to describe whats happening in the world today, so this edition of the Global Risks Report has used a new one: polycrisis. This means that, to mitigate the impact of scarcity, we will need to tackle these risks in an effective, innovative and certainly collaborative way. Click the link to read the complete article: https://bit.ly/3SiYiJK #IWork4TheHartford 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 Moreover, the policy transcends political ideology. WebIn 2023, less than two decades later, the opposite is true. He hopes the U.S. and China can resume their discussions as geopolitical tensions escalate. Carbon pricing, but also collaboration along the value chains and with governments will be critical through leadership. The top 23 risks and opportunities for 2023. Cyber related business continues to be an evolving risk. One area in which geopolitical tensions with China continue to impact cross-border economic activity directly is trade. Evaluating their global supply chains to determine points of vulnerability and, where necessary, considering alternate suppliers or evaluating longer-term diversification efforts. The invasion was not, however, a complete surprise. The conclusion then was that lengthy, complex global supply chains created too much risk for dealing with immediate emergencies. Highlighted the reputational risks of investments in certain jurisdictions. These decisions take time and should be made in consultation with legal and geopolitical risk advisors to ensure they are in compliance with US law and adequately consider all the associated risks (see Mitigating Geopolitical Risk in Practice below). This is in part a result of systemic economic challenges, such as inequality and the economic insecurity caused by inflation and deindustrialization. With de-escalation Ukraines defensive capabilities were further enhanced by the determination of the Ukrainian people to maintain their independence. 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