Global growth opportunities outweigh the current elevated geopolitical and economic risk landscape, according to a recent report published by insurance broker and risk advisor, Marsh.
The 2023 Political Risk Report, published by Marsh Specialty, outlines the major shifts and trends in the global political and economic landscape that will impact multinationals and investors in the coming year.
It identified four areas where increasing risk threatens global trading, security, and investment environments into 2023: persistent political instability; economic retrenchment; competition for strategic resources; and supply chain diversification.
At the same time, the report also highlighted substantial global economic growth drivers that Marsh believes present opportunities that outweigh these risks, if managed properly.
Nick Robson, Global Head of Credit Specialties, for Marsh Specialty, commented: “While it may be unnerving, there are many opportunities for businesses and investors to grow in today’s elevated geopolitical and economic risk environment.
“If the risks are identified, managed, and mitigated effectively, the prospects for short, medium, and long term growth frequently outweigh the risks presented by short term volatility.”
According to the report, the global political and economic environment is likely to remain fragile throughout 2023, as a number of factors work in concert to compound the impact of global risks.
Analysts used persistent political instability, especially when compounded by the impact of inflation, as an example, as it threatens the economic and investment environment and, in some cases, the societal structure of emerging markets.
The World Economic Forum’s Global Risks Report 2023 – published in partnership with Marsh McLennan and others – calls this compounding effect of related global risks “polycrises,” noting that such polycrises have turned the focus of nations inward, analysts explained.
The broker’s Political Risk Report identified this inward focus on economic security, which often comes at the expense of free trade, as another major shift threatening global trade, security, and investment, and warns that decisions made by key economic powers on various issues – ranging from fertilisers and microchips to the energy transition – will continue to have global repercussions.
However, despite the current elevated risk environment, analysts highlighted, there are clear signs that the perceived level of risk exceeds actual risk levels and that at least four significant global economic growth drivers could fuel economic recovery and improve security.
The report predicts that the lockdown backlog of infrastructure investment points to a rise in future activity and expansion globally, while the push to meet 2030 net-zero energy transition goals will see a range of innovative investment activity.
Additionally, the need to diversify supply chains to achieve greater food and energy security will continue to attract investment opportunities, as will the substantial rise in government defence spending worldwide to support allies, counter threats, and accelerate the sector’s modernization.
