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The Global Business Risk Report Q1 2019

Ten Key Global Risks for Businesses

The Dun & Bradstreet Global Business Risk Report (GBRR, formerly the Global Risk Matrix) ranks the biggest threats to business based on each risk scenario’s potential impact on companies, assigning a score to each risk. The scores from the top ten risks are used to calculate an overall Global Business Impact (GBI) score.

Our latest GBI score highlights a third successive worsening in outlook for cross-border businesses, taking risk to its highest level since Q4 2016. Furthermore, the score has remained above the long-term average for a second consecutive quarter.

The Dun & Bradstreet Global Business Impact score for Q1 2019 highlights that risks facing businesses are at the second-highest level on record.
 

Risks almost at record level

Dun & Bradstreet’s GBI score has worsened for a fourth successive quarter, increasing from 270 (out of a maximum 1,000) in Q4 2018 to 279 in Q1 2019, indicating a deterioration in the global business operating environment. The Q1 score is the second highest since the measure was launched in Q3 2013, and is well above the long-term average (249.9). It also shows that there has been a significant worsening in business risk since Q1 2018 – when a record low of 219 was recorded.

 

Our top ten risks combine an assessment of: (i) the magnitude of the event’s probable effect on the global business operating environment, on a scale of 1 to 5 (where 1 is the smallest impact and 5 is the largest); and (ii) the likelihood of the event happening.

Five new risks in the global top ten

Highlighting the ever-evolving global environment, there are five new entries in our Q1 2019 GBRR’s top ten: two from West and Central Europe, and one each from our Latin America, Asia-Pacific, and Pan-Regional categories.

The five new-entry risks are:

  1. European elections in May end with strong gains for anti-EU parties, complicating policy-making at the EU level (GBI 30, out of a maximum 100)
  2. Risks to ecosystems and the threat of extreme weather events (as forecast by the Intergovernmental Panel on Climate Change) materialise much faster than the consensus view anticipates, creating systemic impacts at the global level (GBI of 25)
  3. Lower investment in Brazil’s mining sector following the latest Vale dam disaster drives up iron ore prices (and those for other metals), significantly increasing the cost of inputs for industrial products (GBI of 24)
  4. The UK leaves the EU in a disorderly fashion, causing supply-chain disruptions (GBI of 24)
  5. The continuation of an ‘America First’ stance in US foreign policy alienates traditional allies, resulting in higher levels of tensions; the global political environment thus becomes riskier, raising cross-border risk (GBI of 24)

Among the pre-existing risks in the top ten, two are unchanged, while one GBI score has deteriorated and two have improved. Overall, risks remain geographically spread and diverse, associated with trade, politics, economic developments, new technology and climate change. This reinforces the fact that finance, procurement and supply-chain teams across all business sectors have to combat the impacts of an increasingly complex and globalised world.

Trade risks still predominate

As in the previous report, trade risks continue to dominate in our Q1 2019 GBRR, increasing levels of risk for cross-border business, supply chains and business profitability; three of our top ten risks are associated with trade. In first place, with a GBI of 36 (up from 27 in our previous report) is our concern that US tariffs hit profits and tax revenues in China as the trade war stalemates. Contagion from bad debts then triggers a rapid slowdown, overwhelming policy moves to stabilise the economy, with a consequent negative impact on global growth.

The second trade-related risk is that negotiations fail to stop a US-China trade war, which spirals, with negative secondary effects offsetting new opportunities and cooling global trade growth. This risk is in second place with a GBI of 36 (an improvement on the GBI of 45 registered in the previous report). The third trade-related risk is that the UK leaves the EU in a disorderly manner, disrupting supply chains – primarily in Europe, but also globally. This event is in equal eighth place, with a GBI of 24, and is a new entry in our top ten.

Political factors also important

The highest new entry in the Q1 2019 GBRR is in equal third place, with a GBI of 30. This is our concern that European elections in May end with strong gains for anti-EU parties, complicating policy-making within the EU and undermining the business environment. The second political risk is that a continuation of the ‘America First’ stance in US foreign policy alienates traditional allies, prompting increased tensions; the global political environment then becomes more hazardous, raising cross-border difficulties for businesses. This risk has a GBI of 24, is in equal eighth place, and is a new entry in the top ten.

Economic concerns

Two economic worries feature in this quarter’s GBRR. In equal sixth place, with a GBI of 25 (the same as in the previous report), is the pan-regional concern that growing global debt, alongside rising interest rates, will trigger a fresh debt crunch, creating a systemic banking crisis and sending the global economy into contraction. The second economic risk is in equal eighth place with a GBI of 24, and emanates from Latin America. This is our worry that lower investment in Brazil’s mining sector following the latest Vale dam disaster drives up global iron ore prices (and those for other metals), significantly increasing the cost of inputs for industrial products.

Other factors

The final three factors are pan-regional; two are related to climate and the third to technological developments. In equal third place overall, with a GBI of 30 (down from 36 in our previous report) is our concern that the rapidly growing problem of cyber-dependence and connectivity will lead to more frequent and more damaging cyber-security issues, with ramifications for doing business. In fifth place overall, with a GBI of 26 (the same as in the previous report) is a climatic risk. Specifically, we are concerned that jetstream instability continues to create persistent, anomalous weather patterns across the Northern Hemisphere, increasing costs for the public and businesses alike.

Finally, in equal sixth place, and with a GBI of 25, is another new entry: the risk here is that the hazards forecast by the Intergovernmental Panel on Climate Change (related to ecosystems and extreme weather events) materialise much faster than the consensus view anticipates, creating systemic impacts at the global level.

Summary: Business environment deteriorates again

Dun & Bradstreet’s Global Business Impact score for Q1 2019 shows that the risks confronting businesses have worsened for a fourth consecutive quarter, to reach the second-highest level on record; in contrast, the record low score was recorded just one year ago, in Q1 2018. The Q1 2019 score highlights that business decision-makers still need to monitor the global business environment continually and carefully ahead of the expected slowdown in the global economy (and despite a solid – if unspectacular – recovery from the 2008-09 recession). The geographical spread and diversity of risks related to trade, politics, economic developments, new technology, and climate make the business environment increasingly challenging.

Top Ten Economic Risks Q1 2019

Ranking Region Risk Likelihood of Event (%) Global Impact (1-5) Global Business Impact Score (1-100)
1 North America In China, US tariffs hit profits and tax revenues as the trade war stalemates. Contagion from bad debts then triggers a rapid slowdown, overwhelming policy steps to stabilise the economy, with a consequent negative impact on global growth. 60 3 36
2 Pan-regional Negotiations fail to stop a US-China trade war, which spirals, with negative secondary effects offsetting new opportunities and cooling global trade growth. 70 2.5 35
3 West & Central Europe European elections in May end with strong gains for anti-EU parties, complicating policy-making at the EU level and undermining the business environment. 75 2 30
4 Pan-regional Rapidly growing cyber-dependence and connectivity lead to increasingly frequent and more damaging cyber incidents, with global ramifications. 75 2 30
5 Pan-regional Jetstream instability continues to create persistent, anomalous weather patterns across the northern hemisphere, increasing costs to the public and businesses. 65 2 26
6 Pan-regional Elevated global debt levels allied with rising interest rates trigger fresh systemic debt and banking crises, sending the global economy into contraction. 25 5 25
7 Pan-regional Risks to ecosystems and the threat of extreme weather events materialise faster than the consensus view anticipates, creating systemic impacts at the global level. 50 2.5 25
=8 Latin America Lower investment in Brazil's mining sector following the latest Vale dam disaster drives up iron ore prices and those for other metals, significantly increasing costs of inputs for industrial products. 40 3 24
=8 West & Central Europe The UK leaves the EU in a disorderly way, causing supply-chain disruptions. 40 3 24
=3 North America The continuation of an 'America First' stance in US foreign policy alienates traditional allies, resulting in higher levels of tensions. The global political environment becomes riskier, raising cross-border risk. 30 4 24

Previous Reports

The Global Risk Matrix: Q4 2018

The Global Risk Matrix: Q3 2018

The Global Risk Matrix: Q2 2018

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