Top global risks for doing business in 2016

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Global risks don’t know borders and their impact on different stakeholders is still far from understood. Businesses are particularly vulnerable as internationalization increases their exposure to global risks. Business has gone global over recent decades and the globalization of trade and commerce has brought, along with opportunities such as production efficiency, many risks – from environmental to economic and political. Yet, making long-term investment decisions in an increasingly more complex and ambiguous environment is not an easy task, as the resilience of any individual business depends heavily on the resilience of its suppliers and purchasers, whose supply chains can span many countries.

The Global Risks Report 2016 of the World Economic forum, therefore, dedicates a section of its 11th edition to the analysis of the global risks of highest concern for doing business at the country level. It provides unique insight from the voice of the business community on the topic – a particularly important participant in the global risks landscape.

With unemployment and underemployment identified as the number one risk of highest concern for doing business in 41 economies – more than a fourth of the economies surveyed – the toll of this risk on the well-functioning of business is highlighted once again. Moreover, combined with energy price shocks, these two economic risks top the ranking in half of the economies. These are followed by the failure of national governance, asset bubbles, fiscal crises and cyberattacks. While some patterns emerge on a global scale, the analysis of the EOS data shows that the global risks of highest concern for doing business differ considerably from country to country.

Economic risks dominate the responses from Europe, including the risk of fiscal crises which is among the top five risks of highest concern in 26 economies out of a total of 39. Unemployment or underemployment tops the list in 12 countries, including five in Southern Europe where the crisis has had a particularly severe impact: Cyprus, Greece, Italy, Portugal and Spain. With high unemployment rates, the risk to business is large. Indeed, this reflects frictions in the labour market with skill mismatchs and skill gaps which impede the well-functioning of businesses as they cannot find the right type of employees.

Moreover, unemployment tops the list in four Balkan countries where recent experience of this is particularly acute: Croatia, Montenegro and Serbia – where more than one worker in five is now unemployed – and Bosnia and Herzegovina. Interestingly, cyberattacks is the risk of highest concern in four countries in Europe: Estonia, Germany, the Netherlands and Switzerland.

Cyberattacks is also the top concern in the United States, while executives in Canada are most concerned about energy price shocks. The risks of an asset bubble is featured in the top five risks in both countries. In Latin America and the Caribbean, the risk of failure of national governance is at the top of the concern in seven economies – followed by energy price shocks, number one risk in six economies, and unemployment and underemployment in five. Worldwide, the risk of failure of critical infrastructure is the top risk in two countries only, both in Latin America – Paraguay and Uruguay.

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