Read the risk. Five of last year’s top 10 most dangerous risks have dropped to a lower (and in some cases, much lower) ranking and five previously lower ranked risks have taken their place. ... dominating four of the top five risks overall. With six new risks moving into the top 10, there were, of course, six that moved out, reflecting that prior concerns either didn’t materialize or that they did and were resolved. War remains an unthinkable, catastrophic option, and mutual deterrence needs to hold. One might think that this very favorable trend might lead to optimism about natural catastrophes but instead, concerns remain very high. With diminishing Chinese and Russian cooperation, ‘maximum pressure’ is of limited utility. the past year cross the finish line. ... Do the board and senior executives expect risk functions to align on top risks, risk prioritization and relative responsibilities? The main elements of Beijing’s predatory mercantilism (substantive subsidies to state-owned enterprises and “national champions,” “digital sovereignty” in pursuit of ‘Made in China 2025,’ and economic coercion of foreign investors) remains largely undiluted. Leaders without strategies bungle the recovery. Major biodiversity loss and ecosystem collapse. Meanwhile preferential trade arrangements, bilateral (e.g. Recently, we reported that insured losses from natural catastrophes in 2019 were down by 33% from 2018, which was down 44% from 2017. Atlantic Council Strategy Paper Series Operational risks dominate most top five lists, led by North America, which includes four such risks in its top five. A Trump victory would set the United States up for four more years of withdrawal from the multilateral world order, while a narrow Trump loss could cause domestic political turmoil. As a new decade draws upon us — and as the next conference convenes in February in San Francisco — a new set of challenges is here. Clients depend on us for specialized industry expertise. : Who Governs the US? Ash Jain, Matthew Kroenig. With his impulses unchecked, Trump’s narrow transactional view of alliances may lead him in 2020 to “bring the boys home,” withdrawing at least 6,000 troops and unwinding the US-Republic of Korea alliance. continuing to move beyond just hedging against US uncertainty towards pursuing by Impact of regulatory change and scrutiny on operational resilience, products, and services; Economic conditions impacting growth; Succession challenges; ability to attract and retain top talent; Ability to compete with “born digital” and other competitors; Resistance to … Download the ORX Operational Risk Horizon 2020 report to find out the top emerging and current operational risks for 2020 and beyond for banks and insurers. Water crises. Ad-hoc regional security networks are taking shape by key partners in Asia and Europe. Extreme weather events (e.g. High-performing institutions cultivate and grow talent, carefully balancing costs and rewards. Top risks for 2020. The Top Geopolitical Risks of 2020 December 12, 2019 Rising geopolitical and geo-economic tensions represent the most urgent global risks, and will only continue to escalate in 2020. Source: 2019 Risk in Review Study. The fact that only three of sixty-one nations complied with the United States’ request to cut ties to Huawei offers a preview of the costs to the United States of a bifurcated global economy. Opening the gates to cheap US agricultural goods could undermine Tory base support and stir public anger. So far, no tech-based startup has roared into the insurance sector and stolen everyone’s lunch. Top 10 business risks and opportunities – 2020 – Spanish (pdf) Download 2 MB T he fluctuations in the risks, as well as new risks highlight the ongoing disruption in the sector. We need a new strategy—one that is both ambitious and innovative, geared towards meeting the challenges and opportunities that the new decade brings. Inflection Points Find out the top ten global risks in 2020 for board members and c-suite executives, according to the “Executive Perspectives on Top Risks for 2020… In fact, the only change to our Top 5 Risks for 2020 is the order in which we rank them, with the political and economic impacts of the pandemic pushing the risks previously ranked in fourth and fifth place to the fore. This risk dropped the farthest, but it is also covered under this year’s number two, disruptive technology. Our participants focused on a wide range of issues, from business disruption and malicious attacks to data protection and innovation. North Korea is making new strides toward becoming like accepted de facto nuclear states Israel and Pakistan, reflecting a growing pattern of US retreat and unreliability. Digital remains in the top three. Supply chain attacks are on the rise. Probability of UK-EU trade deal by end of 2020: 50-50 with much less probability (25 percent) for UK-US deal in 2020 given the political problems of passing any trade deal in a presidential election year. Why a collaborative tone is a first step. Mathew J. Burrows is the director of the Atlantic Council’s Foresight, Strategy, and Risks Initiative in the Scowcroft Center for Strategy and Security. A small change in the polling process made it harder for some respondents to give credit for the same thing twice. Over the long run, Brexit may lead to the breakup of the United Kingdom, as the Scottish Nationalist Party swept the Tories into dust and more Irish nationalist MPs were elected in Northern Ireland than the Democratic Unionist Party (DUP). Cyber replaces business interruption, which has moved down into … Here are ten of the top geopolitical risks to watch out for in 2020: 2020 elections: Either a Trump reelection or a victory for a Democratic challenger is bound to deepen US political tribalism. Interesting shifts in the 2020 top 10 risks. The Republic of Korea and Australia, already pondering nukes, may move to the next stage of actively considering them in 2020, as may Japan. Continued vigilance is critical. If the Iran nuclear crisis is not resolved, expect the Saudis to buy or rent a nuke from Pakistan. to dampen the potential for global cooperation, despite authoritarians facing following a potential Trump reelection. Sign up to receive rapid insight in your inbox from Atlantic Council experts on global events as they unfold. In some cases, the coverage for cybercrime-related losses falls under more general types of insurance coverage that was not anticipated when the insurance policy language was written. Here are ten of the top geopolitical risks to watch out for in 2020: 2020 elections : Either a Trump reelection or a victory for a Democratic challenger is bound to deepen US political tribalism. Risk outlook: the world in 2020. 10. The WEF surveyed 347 risk analysts to uncover the most likely post-pandemic threats—and no area from the economy to the environment is untouched. Concerns over operational capabilities have strategic underpinnings. more pressure from their citizens. The top 50% of companies have been growing at twice the GDP growth rate on the average, while the bottom 50% of companies have had near zero average annual growth. Those six risks are: The presumption of this risk was that there is or will be a golden opportunity that will take the company to the next level. Economic conditions in markets we currently serve may significantly restrict growth opportunities for our organization 3. shift from the mere corroding of multilateral institutions and US alliances toward Trump, feeling humiliated that his bromance was betrayed, has initially pretended that all is well—”Kim is my friend,” “we’re in no rush.” But soon will come the wrath of “fire and fury” threatening confrontation with a serious risk of conflict sparked by miscalculation. Disruptive technology above). Theft and fraud jumps to third in this year’s survey – a sign of both its ubiquity for … Insurance industry growth in total tracks well with nominal GDP growth over time, but there are winners and losers. Johnson wants to rule out any extension of the Brexit process, with the risk that the UK departs the single market without any trade deal. While we ask about “DANGER” what we often get is more related to “FEAR.”. 2019 and the early days of 2020 revealed a world … The great unraveling: With the demise of its dispute mechanism, the World Trade Organization—the lynchpin of seventy years of prosperity and a rules-based economic order—may also become defunct. Probability: 60-40; Demise of US traditional alliances: The global leadership deficit grows in a fragmenting world order. Global risks 2035 update: Decline or new renaissance? Each of the issues, and many more identified in our trends report, represent a potential area of risk. Present at the re-creation: A global strategy for revitalizing, adapting, and defending a rules-based international system, Policy on donor acceptance and disclosure. The economy was also the top risk condition for board members, CEOs, CFOs and CIOs, and made it to the top five list for all regions of the world we analyzed for 2020 except for North America. Continued vigilance is critical. Perhaps there were concerns in the past two years that the new cloud-based computing approach that many insurers adopted was not as safe as the old ways of doing things. Growing global populist and nationalist outbursts are likely Many insurers were afraid that retiring Baby Boomers would take decades and decades of valuable experience with them. Here are ten of the top geopolitical risks to watch out for in 2020: 2020 elections : Either a Trump reelection or a victory for a Democratic challenger is bound to deepen US political tribalism. Robert A. Manning, Mathew J. Burrows, A South Korean soldier walks past a TV broadcasting a news report on North Korea firing a missile that is believed to be launched from a submarine, in Seoul, South Korea, October 2, 2019. Risk Radar – Top 20 risks before 2020 3 14 17 8 11 19 5 7 4 9 12 10 15 18 6 13 20 1 2 16 Emerging Established key risk To be considered on a recurring basis Non-standard or exceptional Emerging and exceptional risks, categorized as a current, high priority by stakeholders Top Risks Expected to Increase in 2020 ... For the first time in the history of the survey's 10-year outlook, environmental threats dominate the top five long term risks by likelihood and occupy three of the top five spots by impact. Some insurers are finding that there are always trade-offs. Geopolitical & macroeconomic leads the emerging risks As states are legalizing marijuana, there is a ripple effect of new claims in many insurance lines. This website or its third-party tools use cookies, which are necessary for its functioning and required to achieve the purposes illustrated in the cookie policy. Concerns about this risk increased in 2018 and 2019, only to subside back to the level we saw in 2017. Atlantic Council Strategy Paper Series These large countries, using their market size to weaponize trade via tariffs, will play a larger role in setting terms of trade. The European Union, in the wake of the perceived success of its data privacy protection legislation, Trump’s ceaseless disparaging, and Beijing’s efforts to use economic enticements to split off eastern Europe, will accelerate moves to protect its economic and political sovereignty against the United States and China. Perhaps this risk has fallen so far because people are recognizing that success is more a result of a number of smaller good decisions and of hard work rather than that one golden opportunity. | The report is based on a survey of operational risk practitioners across the globe and in-depth interview with respondents. to the 1930s, as some of the developments which did not reach a denouement in Probability of bifurcated world: 60-40; North Korean defiance: Whether or not Trump agrees to another summit with North Korean leader Kim Jong Un, it will become clear in 2020 that Kim has made a strategic choice: he has no intention—despite US incentives—to dismantle his nuclear arsenal in the foreseeable future. We have you covered! Global business environment slightly less risky in 2020. At the same time, reactions to Iranian overreach, with anti-Iran protests in Iraq, Lebanon, and internally against the Khamenei regime, help to push Tehran toward a new deal, limiting their regional influence, and dampening populist-driven change in the Middle East. A quick win on a deal with Washington isn’t likely to compensate for uncertainty over talks with Brussels, as the UK trades more with the EU than elsewhere. Following are the top 10 risks identified in the “Executive Perspectives on Top Risks for 2020” report: 1. © 2019 Atlantic Council This piece also appeared in The National Interest. A deeper dive into the report, under operational risks, highlights a growing emphasis on “talent and culture,” which made up four of the top 10 risks. Such changes are common. The drivers of activism are being supercharged. Of those, the top 10 risks identified are as follows: Cyber incidents. Back in January, we flagged that as bad as the tech war between the U.S. and … Cyber incidents have been ranked as the top business risk in the USA for 2020. It focuses on a range of issues, including digitalization, business resilience, organizational change, and geopolitical risks. We know how companies can unlock potential through effective risk management. 1. In addition to the usual potential for direct attacks to their business, insurers also may have to pay for losses experienced by their policyholders. Washington is seeking to disrupt supply chains linking the United States and China, cutting off investment, scientific exchanges, and tech exports and imports from China. Clash of efficiency and ethics in new tech applications. Insurers that offer liability coverage may be worried about court cases that challenge tort caps. While, at the federal level, there are major changes being made to regulations that are typically thought to be in favor of businesses, insurers generally operate under state laws and regulations, which for the most part have not changed as much. by Read the 2020 Global Risks Report (GRR) report to see the bigger picture and learn more about the global risks that can impact your company and to build resilience toward these events. This would be more dangerous than 2008, as central bank cooperation and US Congressional action are more problematic. The coronavirus outbreak will weaken Iran, Iraq, and Syria. For the first time this year, Willis Re was joined by Willis Towers Watson’s Thinking Ahead Institute in conducting the survey. This … Interesting shifts in the 2020 top 10 risks. But most executives are worried that something will happen very soon that negates whatever competitive advantage that they have worked so hard to develop. Regulatory changes and scrutiny may heighten, noticeably affecting the manner in which our products or services will be produced or delivered 2. TABLE OF CONTENTS Methodology Analysis Across Different Sizes of Organizations Analysis Across Geographic Regions Overall Level of Risk Concerns for 2020 Overview of Top 10 Risks Biggest and Smallest Changes in Individual Risks from Prior Year Analysis Across Industry Groups Executive Summary Cybersecurity and cybercrime (up from two in 2019) Insurers have more to worry about regarding cybercrime than other businesses. The disruption in global innovation and supply chains will render Washington’s ‘Indo-Pacific policy’ problematic. This article is based on an online survey conducted from December 17, 2019, to January 19, 2020. Insurance Consulting and Technology|Reinsurance, Menu, current location and language selection is United States English, use this menu to select a new location and language, Financial, Executive and Professional Risks (FINEX), 3 factors that make silent cyber risk so challenging for CROs, COVID-19 (coronavirus): An actuary’s perspective, Wild risks that could dramatically change the world, Summary of Natural Catastrophe Events 2019, Central bank/currency risk - total collapse of the financial system, Chasing yield with higher risk investments, Biodiversity loss decline of ecosystem services, Risk of sanction (EU/U.S.) global diplomacy and establishing new institutions without the United States Follow him on Twitter @matburrows. In 2020, US political institutions will be tested as never before, and … Feckless US policy in Syria would also drive regional risk in 2020. Likely this is a result of a suspicion that the “new normal” is for erratic and more severe weather incidents due to climate effects. And after thoughts of impending doom for several years, naysayers have recognized that there may well be greater resilience built into major cloud-based services than their prior systems. Insurers are concerned whether the need to bring along legacy business will doom them to lose out in competition to the newest tech driven startups. For example, “succession challenges and the ability to attract and retain top talent” was cited as the third highest risk for 2020. by Similarly, after more sturm and drang (with a possible US-Iran clash by miscalculation), the EU and Putin facilitate a new Iran nuclear deal 2.0 (a la NAFTA 2.0) with longer sunset provisions and missile constraints. After several years of stable responses, our latest poll shows significant shifts in the risks that are most concerning. End of denuclearization diplomacy: 65-35; Nuclear stability unravels, The New START and Open Skies agreements follow a Trump pattern of withdrawing from “globalist” treaties. Risks typically fall in rankings like this because of high levels of concern and awareness but when they fail to produce any problems or losses, concern fades. Our conclusion in 2016’s Global Risks 2035 was that state-on-state conflict posed a bigger threat than terrorism. Talent and culture risks and technology and innovation risks dominate the top 10. A victory for the Democrats could also fuel uncertainty and fierce opposition over a potential wealth tax, more regulations on business, and an overhaul of the health system, perhaps sparking fierce reaction from markets. Probability: 60-40; A bifurcated world:  Despite a modest US-China trade war pause, the decoupling of the world’s two largest economies amid growing techno-nationalism on both sides is driving a new global economic dynamic. by The 2020 global risks landscape: Top 10 List. The latter group—often excluding the United States—could become the new normal for global trade. The next concern in this area is a jump to a completely different type of technology (See 2. Public anger over sluggish growth, corruption, and low-quality public services will keep the risk of political instability high across Latin America in 2020. The top 10 most dangerous risks for 2020 chosen by the 101 insurance executives who answered our poll are: 01 Cybersecurity and cybercrime (up from two in 2019) Insurers have more to worry about regarding cybercrime than other businesses. All rights reserved. Equally, slowing growth and the EU’s divisions in the wake of its uneven recovery from the 2008 financial meltdown make it an unlikely candidate to pull the world out of a recession. (See 3 factors that make silent cyber risk so challenging for CROs). Kim pursues the “new path” he warned of in his end-of-year ultimatum. And the action of the California Department of Insurance to require insurers to renew fire coverage in the state suggests that as the impact of climate change is felt, regulators will be looking at insurers to help pay for the impact. Similarly, new risks climb in the rankings because of increasing awareness often associated with problems or losses or fear that they will soon produce problems or losses. Follow him on Twitter @Rmanning4. 2 Represents a new risk added to the 2020 survey. Video global system under strain from US President Donald J. Trump’s “anti-globalist” Twenty-five years of Denuclearization Diplomacy has run its course, exhausting all genuine possible nuclear-free end states. Thus, the United States is ending the architecture of restraint, and starting a Hobbesian world of all-against-all, un-learning the lessons from the Cold War of avoiding an arms race. But the new employees are more flexible and may just have the right skills and training for the new processes that will be needed for the future. The EU, led by France and Germany, are increasingly wary of a UK which tries to undercut the single market by not adhering to the same environmental, labor, and other standards. Global business environment slightly less risky in 2020. A UK-EU free trade deal could end up formalizing the Irish Sea as the border between the two trade zones. Dave Ingram The Great Decoupling. The UK will be out of the EU by January 31, but it is less clear whether the December 31, 2020 deadline for completion of a UK-EU trade deal can be met. End of US-ROK alliance, probability 50-50 (strong Department of Defense and Congressional pushback). A little more than a year ago, interest rates looked like they were going to continue to gradually head upwards to levels that would make it easier financially for insurers to run businesses where they hold other people’s money, sometimes for long periods of time. 101 (re)insurance executives participated in the survey. Want to be the first to get up to speed on the meaning of big, breaking international developments? (39% of responses) Cyber risk tops the Allianz Risk Barometer for the first time with … The sharp rise in perceived danger from climate change indicates that many in the insurance industry believe that with evidence like the wildfires in Australia and California, that latency period has passed. 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