Business and the Global Economy: Risks, Impacts and Mitigations

Doing business in today's global economy. Discover the risks, impacts and sustainable solutions

The world economy is in a low-growth trap. A range of increasing risks are weighing on growth: youth unemployment and underemployment, Populist polarization, world trade, and cybercriminals exploiting our thirst for technology.  But how can the global Business community achieve a paradigm shift to mitigate these risks?

By reading through the interactive infographic below, you can find out how these four risks are affecting businesses and discover the Solutions that can help create sustainable, long-term growth.

Unemployment/Underemployment

Economic Risk

Global youth unemployment is on the rise along with underemployed youth who are either overeducated for current roles or in part time jobs.

Global youth unemployment rate is expected to have reached 13.1% in 2016 and into 2017
global number of youth unemployed is seen rising by half a million to 71 million, first increase in 3 years, in this period. This is largely due to the economic slowdowns experienced in Latin America, the Caribbean, Asia and the Pacific. 

_{(Source: International Labour Organization, 2016)}

Business Impact

Youth unemployment leaves businesses with an inadequate talent pool.

Sustainable Solution

To establish long-term change, governments, employers, risk managers, educational institutions and civil-society organizations must come together. This collaboration is key to improving youth unemployment and underemployment.  

• Governments
• Employers & Risk Managers
• Educational institutions
• Civil-society organizations

Populist Polarization

Economic Risk

Globalization, rising wealth disparity, migration flows and anti-establishment views have contributed to the rise in populist polarization.

Populism gained 35% of the developed world votes in 2016, the highest proportion since 1934 when it was at 40%. 

_{(Source: Bridgewater, 2017)}

Business Impact

Political outcomes play a role: 

One of the UK’s ‘’big six’’ energy suppliers revealed Q1 2017 revenues were impacted by the decline in the value of Sterling which fell after the UK voted to leave the European Union. The company expects the UK market to remain “challenging”.

_{(Source, E.On, 2017)}

Wealth inequality impacts corporate growth:

Companies that can afford to hire well educated workers have a stronger business trajectory.

Less successful companies that pay employees poorly will see their growth fall further behind. 

_{(Source: Harvard Business Review, 2017)}

Sustainable Solution

Technology

Economic Risk

Over 3.2 billion people around the world have access to and use the internet. _{(Source: World Economic Forum/INSEAD/Johnson Cornell University, 2016)}

As the world becomes connected, cybercrime is growing.

It is predicted that cybercrime will cost global businesses over $2 trillion by 2019. _{(Source: Juniper Research, 2015)}

By 2021, cybercrime will cost the world more than $6 trillion annually. _{(Source: Cybersecurity Ventures, 2016)}

Business Impact

61% of global CEOs see cyber security as a worry as it threatens both national and commercial interests. _{(Source: PwC, 2016)}

Ransomware = a virus tries to get control of computers until a ransom is paid.

These attacks are on the rise.

Global businesses that were impacted included Spain’s Telefonica, America’s FedEx and Russia’s Megafon.

Sustainable Solution

Trade

Economic Risk

In 2016, weak international trade contributed to slowing world growth to 2.3%, its weakest pace since 2009. _{(Source: World Bank, 2017)}

Rising protectionism and the future of trade:

In the US, if trade policies take a protectionist turn, this could lead to higher import costs and impact growth. _{(Source: World Bank, 2017)} 

The WTO has calculated that when the UK exits the EU, the cost of additional tariffs on goods imported to British consumers will be £9 billion. _{(Source: World Trade Organization/Reuters, 2016)}

Business Impact

Impact on global supply chains:

If changes were made to the current trade agreement, increased tariffs on car imports will disrupt American manufacturers and increase tax bills.

The motor vehicle industry would see the highest increase in tax bills due to border adjustments
Estimated change in tax liability if company imports were taxed and exports were exempted (change in sector taxes as % of sector GDP)

Sustainable Solution

With uncertainty around global trade policies, companies in the UK, US and Asia, should engage with governments to make their voices heard on specific areas where agreement is needed to support their business models. _{(Source: Clifford Chance, 2017)}

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