Authored by: Michael Susong, Sumedha Senanayake
In any given year, we can expect a dynamic global risk landscape. Risks beget new risks, crises compound on one another, and our ever-connected world prompts organizations to closely monitor global events to anticipate how their business will be impacted. The nature of global risk commands not just forward-looking insights but an introspective review of what transpired in 2022 and how it can inform future risk management decisions.
The Main Character of 2022 Global Risk: The War on Ukraine
The sole crux of what occurred in 2022, eclipsing the rest of the year’s global risks, was Russia’s invasion of Ukraine in February. The invasion itself was expected and predicted, but the conflict’s surprising trajectory and reverberations continue to persist today. Ukraine’s resistance, with collective western support, rendered Russia’s invasion anything but the swift victory that was initially anticipated.
The economic and security ramifications have been incredibly intense, especially in unforeseen ways. For example, consider wheat, a crop for which Russia and Ukraine are two of the main exporters. Russia’s invasion drastically weakened wheat production, leaving several nations throughout Europe and Asia suffering. The lack of wheat supply and inflated costs led to stratospheric costs for basic goods on which global citizens depend, such as bread.
Another essential good hit hard by global inflation—exacerbated by Russia’s invasion—was fuel. As winter approaches, real concerns remain about Russian gas exports into Europe slowly subsiding, prompting stark price hikes in industrial giants like Germany. With an eye on 2023, it’s clear that countries and organizations that fail to be proactive this winter risk further suffering among their margins and personnel.
Timing around the Russia-Ukraine conflict's conclusion is uncertain, but what’s clear is that the economic blowback will continue globally, and these additional risks must factor heavily into any risk forecast.
The Further Unfolding of COVID-19
The damage of the pandemic and its impact remained throughout 2022 in many expected ways. COVID-19 affected travel, supply chains, healthcare, and the economy on a global scale— prompting a series of adaptations from countries and organizations in an attempt to mitigate the fallout.
The continued infection of workers and subsequent factory closures resulted in staff shortages, backlogs at key ports, and a significant cascading effect on the global economy.
Outbreaks and infections also impacted domestic security—depending on how countries dealt with factors like case surges and business closures, including those in the political realm.
The Rise of Political and Domestic Extremism
The U.S. Capitol attack on January 6th, 2021, was a jarring example of domestic violent extremism, and these themes resonated globally in 2022 to varying degrees.
Brazil held tense elections—clouded by warnings from President Jair Bolsonaro that he would not concede an electoral defeat, even if the votes were not in his favor. The leadup to the general election drew heavily from the January 6th playbook in the United States, further heightening concerns of violent conflict alongside denials of a free and fair election. The 2022 risk forecast monitored key elections like this one, and every stakeholder benefited from the fact that Bolsonaro finally did accept the peaceful transition of power.
A Look at the Gulf States
A positive strength in the global risk landscape of 2022 was the warming of relations between Israel and nearby Arab nations, strengthening their business relationships and creating a deeper foil against Iran. Given historical tensions between Iran and Israel, the religious division between Sunni and Shia, and the strong economic potential, there are several forces at play working to drive the detente to further success. The mere fact of acknowledgment and the economic cooperation—however scant—between parties marked a huge change between the Arab states and Israel.
While progress undoubtedly occurred this year, it will take time for the detente to bear fruit fully. Nonetheless, these diplomatic results should bode well for the Middle East and gulf region, creating a positive change in overall security conditions.
China and Taiwan
In a more concerning risk forecast, China’s expanded influence into Central Asia and South Asia remained a major threat throughout 2022. Tensions between the US and China further increased following Speaker Nancy Pelosi’s visit to Taiwan and China’s subsequent response: carrying out military exercises off the coast of Taiwan.
As forecasted, tensions did not escalate to the point of invasion as they did with Russia and Ukraine. Still, the raised tensions throughout 2022 were not insignificant and could indicate escalating tensions in the near future. China’s expanded influence will likely be a focal point of future forecasts, given its outsized impact on the global business and security environment.
Preparation Pays Dividends
While the slate of risks in 2022 strongly matched the year’s forecast, the severity of their reverberations can have an unexpected impact worldwide. Risk reverberations should factor heavily into a yearly forecast, whether those risks are economic, geopolitical, social, or otherwise crucial to the global business environment. Organizations that enact dynamic risk management solutions will be better positioned to navigate the global risk landscape and conduct business with fewer disruptions.
Register now for a live webinar featuring experts Michael Susong, Sumedha Senanayake, and Jonathon Keymer, who will take a look at risks with the potential to disrupt business operations in 2023.
