Welcome to the Willis Research Network (WRN) Digital Dialogues series. The WRN aims to bring insights from the world of science into practical discussions around risk and resilience.
“…we are delighted to introduce these Digital Dialogues, to continue the discussion with virtual expert panels… ”
Hélène Galy
Managing Director
Willis Research Network
Throughout the year, we hold several events covering a wide range of topics, but these gatherings often leave many of us wanting to know more, so we are delighted to introduce these Digital Dialogues, to continue the discussion in a more digital way, with key questions tackled by a virtual panel of experts, both in-house and in our worldwide network of partners.
We hope that you find this series interesting and keep coming back as we add to it, and we would also be delighted if you wanted to suggest topics or questions to feed this discussion.
Hélène Galy
Managing Director
Willis Research Network
Digital Dialogue No. 2
- Introduction from Lucy Stanbrough, Emerging Risks Hub, Willis Research Network
- The Panel
- Q5: Let's look farther out, thinking about the next year or so. How might COVID-19 reshape geopolitics and geostrategy at the international level?
- Q6: What will the political implications of the shock be, for countries that are hit hard? Will any countries become politically unstable as a result?
- Q7: What business risks might arise from the geopolitical shifts that we have just heard described?
Lucy Stanbrough, Emerging Risks Hub, Willis Research Network
We started 2020 in a world where areas that were once regarded as predictable and stable became volatile, and changes in international policy were bringing new uncertainty to long running conflicts. As COVID-19 continues to spread around the world, the impacts are creating new dynamics.
“As COVID-19 continues to spread around the world, the impacts are creating new dynamics. ”
Lucy Stanbrough,
Emerging Risks Hub,
Willis Research Network
This Digital Dialogue looks to focus on those ripples and considers the short- and long-term consequences on geopolitics. Whatever the case, it is likely that post COVID-19 nations will retreat to a more protectionist stance, as both the concepts of State and Nationalism are reinforced, especially as a potential global recession begins to bite.
Multinational businesses with many operations centres, multiple markets and complex supply lines are going to need to be vigilant to finance, economic and trade risks that area going to emerge as a result, and the thoughts from Elisabeth, Simon and Sam provide some insight on futures to watch out for.
The Panel
Elisabeth is a Geopolitics expert who has been consulting with the WTW Research Network since 2019, specifically exploring grayzone aggression and looking at its implications for risk managers. This work forms part of a wider research programme on geopolitical risk, including the importance of China and security impacts of climate change.
Elisabeth is a resident fellow at AEI, where she focuses on defense against emerging national security challenges, such as hybrid and grayzone threats. Concurrently, she is a columnist with Foreign Policy, where she writes on national security and the globalized economy, and is a member of the National Preparedness Commission (UK).
Simon is an emerging markets specialist with an interest in business environments and investment. He is responsible for Oxford Analytica’s global risk analytics platform as well as on delivering scenario planning and forward-looking country analysis for large public and private sector clients.
Simon previously worked for Citigroup across Latin America, where he focused on identifying external and operational challenges for the bank. He holds an MBA from the Kellogg School of Management as well as an MA in International Political Economy from the University of Warwick and a BA in International Studies from the University of Birmingham.
Q5: Let's look farther out, thinking about the next year or so. How might COVID-19 reshape geopolitics and geostrategy at the international level?
Elisabeth Braw
There are two things. First, what is the nature of the transatlantic relationship – will the virus bring us closer or exacerbate the transatlantic rift? Since Trump took office it has looked like it would go either way at different times.
“It is not enough for countries to fight it alone on a national basis, we need a large alliance of some kind at a multi-national level. ”
Elisabeth Braw
Senior Research Fellow
RUSI
I think what COVID-19 has shown us is there is a need for transnational cooperation for threats. It is not enough for countries to fight it alone on a national basis, we need a large alliance of some kind at a multi-national level.
There are two pathways at the moment. Firstly, unless we want China to lead it, this needs to be the US. This could bring the US and Europe closure together and keep the US in the role as the global policeman. However, China could claim that role in the face of the United States’ near-complete absence of global leadership. This development would bring about consequences.
At the moment we’re seeing the Chinese government use many different approaches to try steer towards this option, using methods from information and disinformation campaigns to aid, which is creating confusion and anxiety in the West.
Q6: What will the political implications of the shock be, for countries that are hit hard? Will any countries become politically unstable as a result?
Elisabeth Braw
People have been coming uncomfortable with the dependence that globalisation entails. At a time when life and business continues as normal and there are no tensions between countries, but as we’re seeing now tensions are increasing between countries.
There is greater desire to maybe not pull up the drawbridge but to limit the impacts of globalisation, which brings about a series of interesting consequences for sectors like manufacturing. Should we start completely manufacturing products in our own countries, is there a desire to, is that effective? The transmission of this virus has really highlighted a whole series of risks that continue to unfold around global supply chains.
Simon Coote
From my perspective, globalisation as we know it is dead. It has been coming under significant pressure over the last few years from the likes of the US-China trade war, and Brexit. Examples that at the heart of their arguments go against the principles of globalisation.
The likes of the US and UK are likely to focus on domestic job creation, production and de-regulation, potentially at the cost of adhering to established global norms. Trade policy will be transactional and bilateral. However, it is probably important to break the question into two areas – the movement of people and the movement of goods.
“COVID-19 has reinforced the desires of some countries to restrict the movement of people. Something that China and the US increasingly have in common. ”
Simon Coote
Head of Risk Analytics
Oxford Analytica
COVID-19 has reinforced the desires of some country to restrict the movement of people. Something that China and the US increasingly have in common. China is relatively restrictive in terms of encouraging foreign workers into the country, and the US is the midst of changing their approach to this. The UK is just at the start of this and there are unanswered questions about movement within the Schengen zone. In the short to medium term it feels like the movement of people is done.
In terms of goods, COVID-19 brings two issues to light. Firstly, the greater need for onshoring, pushed by economic policy that is about encouraging domestic job creation and supply chain security. Alternatively, the second thing it brings to light is the benefit of greater diversification to reduce supply chain risk. A lot of companies in the US have their supply chains in China and APEC. To what extent are greater footprints needed in South America and Africa?
China is likely to be ever more active on the global stage, including at the forefront of regional integration in the APEC region and Africa, and will use investment and soft power to do so. The extent to which the US takes steps to offset that remain to be seen and will depend in part on the extent they continue to be affected by the current health crisis. Whether they have enough capacity or interest to counter international efforts remains to be seen. Events in November will certainly have a bearing.
Q7: What business risks might arise from the geopolitical shifts that we have just heard described?
Sam Wilkin
The challenge that Elisabeth and Simon have both mentioned, is that it looks like we’re heading to a world of much greater government intervention; whether that is around national production or job creation.
As a result, a number of businesses will find themselves in a completely different strategic environment when this crisis passes, in which government intervention will shape success and failure in their industries. We’re already seeing export restrictions in the medical and health products sectors in more than 50 countries, and interventions in the food production sector in countries like Russia and Egypt.
On the more positive side, the thing to keep in mind is the economic numbers that we have been seeing from this crisis have been shocking. If they were generated by a normal recession – which is the main lens many people have been using to interpret these numbers – they would be terrifying. In a normal recession, people who become unemployed must find new and different jobs, sometimes in different cities or different industries, which takes a long time, can lead to lower productivity, and is therefore a long-term drag on the economy (economists call this and related processes “scarring”).
But this recession is very different from a normal recession. Many and perhaps most people in the US and Europe will, when they are allowed to do so, go right back to work where they had been working before, in the same jobs for the same companies, which suggests a very quick recovery. Indeed, I’ve seen some recent research that suggest if the recession is less than two quarters the economy is likely to rebound in a V shape.
“Certainly, for the time being, the huge unemployment figures we are seeing represent real hardship and diminished incomes.”
Sam Wilkin,
Director of Political Risk Analytics,
Financial Solutions
Certainly, for the time being, the huge unemployment figures we are seeing represent real hardship and diminished incomes. And many experts believe that lockdown restrictions will be lifted slowly. If the recession goes on longer than two quarters, or if government bailout programs are insufficient or poorly-targeted, we are more likely to see an increased number of companies going bankrupt – which will create more scarring that will become a persistent drag on the economy.
But it is very possible we will have a rapid rebound. That also creates a challenge for companies, because if you have this kind of rapid rebound and you’ve spent the last two quarters only thinking about trying to minimise your financial losses, then you stand the potential to lose market share during the recovery. In a sense, losing market share is a longer-term problem, and more difficult to fix, vs. taking two bad quarters of losses. It will be hard for companies to get back up to speed. Even the positive view brings challenges for businesses to manage.
That said, I have been pleasantly surprised by many aspects of the corporate response so far. There are reputation benefits companies can gain during the crisis. I would say that a lot of companies have already responded better to this in terms of building public trust than many governments have, which is a positive story to remember.
Contacts
Managing Director of WTW Research Network.
Hélène joined Willis in 1998, specialising in natural hazard modelling and reinsurance optimisation. Since 2001, she has been leading multi-disciplinary teams, who research, design and develop analytical solutions and insights for risk identification, quantification and management. She currently leads the Willis Research Network, an award-winning public-private partnership, which harnesses over 60 science partners to form innovative long-term collaborations, improving our understanding of risks (natural hazards, technological risks, geopolitical drivers of risk) for the benefit of clients and society: using science to support resilience.
Hélène has extensive experience in spatial modelling, design of innovative solutions, and applying science to business challenges. Her current focus is on Climate advisory services (advising corporates on how leading-edge climate research can help them quantify their exposure to climate variability and climate change; exploring the links between climate change and national security) and on People Risks (how people can increase vulnerability or improve resilience: terrorism, societal resilience to systemic risks, including pandemics).
She holds a BSc in Economics & Political Science (Sciences Po), and an MSc in Environmental Economics (UCL).
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