In a challenging year marked by geopolitical events, 69% of companies around the world reported supply chain disruptions due to political events.
The findings found that 96% of companies have invested in new political risk management capabilities. These investments include enhancing corporate processes and creating cross-functional teams.
State-sponsored supply chain disruptions, partly resulting from disruptions in the Red Sea and “grey zone aggression”—actions intended to weaken a country without open warfare—are among the top business concerns for 2024. For the first time, grey zone aggression has entered the top 10 risks.
Additional findings:
- 47% of companies experienced political risk losses exceeding US$50 million.
- The conflict in Gaza has had less financial impact than the conflict in Ukraine, with 4% reporting significant financial impact from Gaza versus 20% from Ukraine.
- Trends towards geostrategic competition and populism are expected to strengthen.
- With the US heading into elections, 64% of respondents reported concern about political risk in North America, matching the concern for Asia.
Leading business risks
- Ukraine complications and escalation
- Year of elections
- US-China rivalry
- Uncertain climate policy
- Mismanaging China risk
- Middle East escalation
- The next big conflict
- Home-market growth slowdown
- Institutional decay
- Grey zone action
After a couple of challenging years, companies seem to have accepted that significant political risk losses are the new normal and are working on building risk management capabilities. Highlighted are concerns about infrastructure attacks, such as sabotage of pipelines and cables, and attacks on assets in international waters, facilitated by the proliferation of drone technology.
An oil industry executive noted that while political risk is acknowledged, it does not deter operations and is managed within the broader risk management framework. Meanwhile, facing hybrid or grey zone threats due to the Ukraine war, including sabotage and cyberattacks like the Nord Stream attacks.
The conflict in Ukraine remains the top risk, followed by concerns about elections. With more citizens voting in 2024 than any time in the next few decades, concerns about trade wars, rising protectionism, and populism, managing political uncertainty and potential business repercussions is a significant challenge.
