Most people involved in international business today grew up in a world where increasing globalization was a major theme for decades. Another consistent theme was pro-commerce policymaking by governments.
It can be disorienting to fathom how starkly things have changed in fairly short order. As described in a new report by Marsh, the insurance broker and risk management firm, the newer trends are “increasing regionalization, export controls, and a growing number of barriers to trade and finance.”
Partly driving the shift, Marsh wrote in its “Political Risk Report 2024,” is governments’ increased focus on such priorities as ensuring supply chain resilience, protecting national security, and ensuring a successful green transition.”
One effect of increased government involvement in economic activity is companies relocating to places perceived to be safer, either geopolitically or regulatorily. “This can distort supply chains, creating supplier uncertainty and bringing businesses into closer contact with comparatively unfamiliar governments and regulatory systems,” Marsh said.
The report stressed that for companies accustomed to operating in a globalized environment, failure to keep up with regulatory decision-making where they do business, as well as the direction of relations between countries, can pose significant operational risk.
Election Disruption
It is, of course, an election year, not only in the United States but also in more than 60 other countries. According to the report, a record number of voters will likely focus on domestic economic issues, as well as international security concerns.
The election outcomes likely will disrupt markets and “direct the course of global events for the next decade and beyond,” said Robert Perry, global political risks, and structured credit leader for Marsh Specialty.
The large number of elections — Marsh called this “the biggest election year in history” — means there will be a corresponding elevated risk for election-related violence.
Importantly, compounding that risk is what Marsh called “a new and poorly understood factor: the potential for AI to amplify political misinformation and disinformation.”
The report made note of “the weaponization of AI by non-state groups, adversarial states, politicians, and individuals to amplify misinformation and disinformation.” Such efforts will “further exacerbate policy uncertainty and political violence risks for organizations and investors,” Marsh said.
In particular, the report underscored the threat posed by bad actors leveraging AI tools to create convincing yet fake video and audio. The U.S. government has accused China, Russia, and Iran of trying to weaponize AI for those purposes.
Meanwhile, anyone hoping the world’s risk profile has hit its zenith may be disappointed. According to the World Economic Forum’s Global Risks Report 2024, published in partnership with Marsh parent Marsh McLennan, the global risk outlook is “predominantly negative” over the next two years and “expected to worsen over the next decade.”
Among the nearly 1,500 global risk experts surveyed by the WEF, nearly two-thirds described their 10-year risk outlook as either “turbulent,” featuring “upheavals and elevated risk of global catastrophe; or “stormy,” with global catastrophic risks looming.