David Anderson, Head of Credit & Political Risk at Zurich Insurance Group, explains the key findings from a recent study released along with the Atlantic Council, a think tank in Washington DC. The report entitled “Our World Transformed: Geopolitical Shocks and Risks”, looks at global risks with geopolitical consequences and interconnections.
Mr. Anderson says, for example, if multiple economies start raising trade barriers, it will impact economic growth, employment and poverty. These factors feed back into geopolitical risks faced by international companies. He notes that an anti-trade sentiment has become popular, and companies need to prepare for a hi-cost world as a result.
The “Our World Transformed: Geopolitical Shocks and Risks” study looked at three geopolitical risks of importance to corporate risk managers, including global protectionism, energy risks stemming from the Middle East, and water scarcity.
With the Saudi/Iran conflict, there is also a proxy war being fought in Syria and Iraq. Tensions in the Middle East increase the likelihood of higher oil prices, which can damage the world economy, or the broader involvement of other countries in the Persian Gulf region.
“Water scarcity is a huge issue”, according to Mr. Anderson, and increased global temperatures mean more people will be affected by it. Water scarcity influences poverty, refugee migration, and a high degree of geopolitical risk. He believes the need for policy makers to address water scarcity is “paramount.”