A fifth of companies reported had to restate earnings due to geopolitical events over the past year, and 69% were reporting supply chain disruptions relating to geopolitics, according to a new report from WTW entitled How are leading companies managing today’s political risks?
The 7th annual political risk survey produced by the global advisory, broking, and solutions company found that the general sentiment of alarm measured last year among companies has been channelled into preparedness. Some 96% of respondents said they have invested in new political risk management capabilities this year, including enhancement of corporate processes and creation of cross-functional teams.
Partly as a result of disruptions in the Red Sea, state-sponsored supply chain disruption appeared as one of the main business concerns for 2024 and ‘grey zone aggression’, meaning any action used to weaken a country by any means short of war, has reached the top 10 risks for the year for the first time.
Nearly 50% of companies surveyed experienced a political risk loss in excess of $50 million
The escalations resulting from the conflict in Gaza have had less of a financial impact than the conflict in Ukraine: 4% reported a material negative financial impact for Gaza vs 20% for Ukraine.
Top Risks 2024:
| 1 | Ukraine complications and escalation |
| 2 | Year of elections |
| 3 | US-China rivalry |
| 4 | Uncertain climate policy |
| 5 | Mismanaging China risk |
| 6 | Middle East escalation |
| 7 | The next big conflict |
| 8 | Home-market growth slowdown |
| 9 | Institutional decay |
| 10 | Gray 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,” said Sam Wilkin, director of political risk analytics at WTW. Wilkin said that “panellists were particularly concerned about infrastructure attacks, like sabotage of pipelines and cables. In addition, assets in international waters are being targeted because they can be struck without inviting retaliation”. The wide dissemination of drone technology had made such remote attacks much easier, he noted.
The survey and interviews were conducted in March and April 2024 by Oxford Analytica. They are based on responses received from 50 companies around the world, of which 64% have revenues in excess of $1bn.
wtwco.com
