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WTW Research Network
Risk & Resilience Review: Emerging Risks from Geopolitical Shifts

May 3, 2024

Welcome to the WRN Risk & Resilience Review, a biannual publication created with WRN partners that brings insights and event response to topics influencing organizational and societal risk.
Corporate Risk Tools and Technology|Credit and Political Risk|Cyber Risk Management|Reputational Risk Management|Geopolitical risk - Understand|Willis Research Network
Risk Culture

Supporting the WTW smarter way to risk, this report introduces research and opinions that provide new perspectives to support risk management and resilience. In future editions we will focus on themes such as disruptive technology, data and disinformation, population and demographics, and emerging risks. But for this edition, we are delighted to present a series of pieces that highlight our work on geopolitics, featuring topics on supply chains, national competition and emerging risks.

These topics highlight a need for an integrated approach to understanding risk. A balance between efficiency and resilience poses both significant challenges and opportunities for most organizations; embedding a culture of risk management is crucial. Effectively pricing risks requires a nuanced understanding of the complex interdependencies within them. The traditional approach to pricing risks relies on aggregated understanding, which poses challenges in the context of these areas due to the lack of comprehensive data, transparency and understanding of risk modelling.

Resilience: A cultural imperative

The term "resilience" has garnered significant attention in recent years. It is interesting to pause and reflect on its definition and practical application, which remain subjects of debate. The word "resilient" originates from the Latin verb resilire, meaning "to jump back," and it was introduced to the English language in the early 17th century. Despite its frequent use by academics, practitioners and policymakers, it is often employed in contexts where it might not accurately convey the intended meaning. When we consider a physical structure that is moved out of form by an adverse event but returns to normality afterward, it can be deemed resilient. This differs from the term "robust," where we do not accept the temporary structural change under the adverse event.

Organizations, however, are not physical structures but living socioecological systems that adapt to challenges; organizations that experience an adverse event and find themselves able to return to normality will often have adopted learning from the event and have an opportunity to utilize knowledge gained from their survival to Bounce-Forward-Better and act more efficiently in future similar adverse situations.

It may even evolve toward antifragility, meaning becoming stronger and more adaptable in the face of challenges.


The geopolitics of risk

For many, 2024 will be defined by political events. The year has seen continued conflict in Ukraine, fresh violence in Israel/Gaza and regional tensions across Africa. 2024 is also being dubbed “the year of elections.” By some estimates, more than 4 billion votes will be cast in national polls this year. Against a backdrop of a cost-of-living crisis, “economic voting” may make it a year of change in many countries, and the diversity of new global actors and transnational linkages may present unprecedented opportunities but also new risks.

Our opening article looks at the emerging and interconnected risks for business in the geopolitical space, providing a commentary on a selection of ongoing events and how risks emerge from global conflict. We look at the blurred lines between war, conflict and peace and how state competition can lead to grayzone aggression (Section 2.1).

Globalization also means the demand for finite resources is more widespread than ever. There is increased competition across the globe — competition that is enhanced by resource scarcity and climate fragility. Our second article, by WRN partner Cullen Hendrix at the Peterson Institute for International Economics (PIIE), explores green competition amid an environment of resource nationalization and energy security.


Supply chain: Paradigm shift in boardroom focus

The COVID-19 pandemic exposed the precarity of supply chains, acting as a perfect storm that thrust supply chain vulnerabilities into the spotlight. From manufacturing shutdowns to transportation bottlenecks, the pandemic illuminated the fragility of global supply networks. Companies found themselves grappling with shortages of essential goods, inconsistent demand patterns and logistical nightmares as borders closed and economies ground to a halt. Highlighted by recent crises, the management of supply chain risk has proven increasingly challenging to grasp, yet it remains a crucial and integrated component of operational excellence for corporations striving to advance their business objectives. The prospect of protectionism and the rush to de-risk supply chains may claim the highly innovative, integrated global knowledge ecosystem supporting them as a casualty. In Section 2.3, we speak with Enrico Savio, managing director of Leonardo International, and Frederick Gentile, WTW’s director of Risk Engagement, to explore the complex industrial effects geopolitical shifts are having on supply chains, trade flows and international commerce.


Securing critical infrastructure

While this private sector shift is vital, it presents its own set of challenges. Flexibility of global transportation networks creates a perceived ability of being able to take other routes if necessary; however, those routes, costs and impacts are poorly understood. The role of critical national infrastructure is increasingly important as part of a public-private conversation on resilience. Political risk from foreign ownership creates potential geopolitical issues for governments to confront. In Section 2.4, we explore efforts to strengthen regional and national resilience against future crises through “whole of society” resilience, looking at public-private partnerships and the role of critical national infrastructure.

Semiconductors are increasingly seen as part of the critical infrastructure framework in the digital age and a totemic industry linking geopolitical and supply chain conversations. In Section 2.5, we examine the complexities of onshoring chip production amid geopolitical risks and how external pressures exerted through leadership initiatives and government mandates have further underscored this necessity — for example, the German Supply Chain Act, the European Chips Act and the American Chips Act, all of which have heightened the imperative for shifting focus and incorporating resilience into boardroom discussions.

Interconnectivity of risks within large and complex organizations

Recent geopolitical events have ushered in a new era for sustainable business management, prompting acceptance of the need to allocate resources toward building resilient operations and changing the managerial focus in many organizations.

Traditionally, managerial attention has been directed toward reducing up-front costs to enhance competitiveness and profitability. Yet, the newfound emphasis on resilience demands a broader, more long-term perspective. Events once thought rare are becoming more likely or occurring at scales previously not seen. The historical record alone does not capture the full range of potential risks. By examining what-if scenarios, organizations can gain insights into potential vulnerabilities and develop strategies for a more resilient future (Section 2.6). Managing emerging risks to enhance competitiveness and resilience.

Newly released guidance for managing emerging risks to enhance resilience states that “emerging risks are characterized by their newness, insufficient data, and a lack of verifiable information and knowledge needed for decision making related to them .” In our final article (Section 2.7), Paul Larcey, co-director of Princeton University's Global Systemic Risk Faculty, provides perspectives on emerging global risks. We explore how leading organizations are addressing their risk portfolio and financial impact while balancing emerging risks and looking at how challenging the interconnectivity of risks brings unseen/unappreciated risk dependencies to the surface.


Head of People Risks Research,
Managing Director of WTW Research Network
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Head of Technology Risks Research,
Programme Director and Climate & Resilience Hub
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Head of Emerging Risks and Business Engagement

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