* This article was originally published in the GRC Professional Magazine: Financial Crime 2019 Edition ,
Resilience is the key to dealing with the new global challenges in 2019 and beyond.
This was the advice given to attendees of the Annual Risk Map 2019 event, hosted by Control Risks and The Global Compact Network Australia (GCNA).
This event expanded on Control Risks’ Risk Map, released last year. The Risk Map considers the possible risk landscape for companies with global exposure.
Control Risks has an acute sense of the international environment of emerging risks and changing regulations. Speaker at the event, and Control Risks’ Senior Partner, Dane Chamorro, gave a high-level view of the developing risks posed by increasingly nationalistic politics, changes to data protection approaches, and the ever-increasing risks resulting from climate change and the knock-on effect it has on regulations.
“What we mean by ‘resilience’ is the ability to anticipate, mitigate and recover from external shocks to a corporation,” Chamorro said.
He went on to say that resilience is the way businesses actualise opportunities.
The first thing Chamorro looked at was the issue of nationalist risk, which he noted some also call ‘nativist risk’.
“What you have to deal with now is the new normal, and that is a much more ‘nativist’—some people use that phrase—or nationalistic approach to business in certain countries. Obviously, the bigger the country is the more likely they are to take that approach because they can.”
However, Chamorro added that there are still various opportunities to do business in increasingly nationalist countries by understanding the local political personalities. There are also opportunities to address the business elite who might be at-odds with the nationalist political leadership.
“Both ways you can make money, but both ways you must have the ability to be resilient.”
The other issue upon which Chamorro touched is that of climate change. He showed how the creation of food shortages has destabilised governments in the past, using the 2010 crop failure as an example to demonstrate how the cessation of the Russian wheat export impacted the Middle East and became a major contributing factor to the ‘Arab Spring’ the following year.
“The governments weren’t resilient at managing the price increases that came with the ban on the sale and export of Russian wheat.”
The result was that the price of flour and bread went up, which then led to demonstrations.
“Ten years on, we are still dealing with the fallout—a very violent and disruptive fallout from one bad summer in Russia.”
Climate change also poses the threat of weaponised regulation.
Chamorro highlighted the issue of the American political gridlock and noted his suspicions that the Trump administration will focus more on domestic politics while encouraging business to focus on local regulations.
This is problematic from a liberal democratic perspective because it means the resulting vacuum might be filled by China or Russia. In addition, in the US, California is a major business centre, as well as one of the most-highly regulated spaces in which to operate.
Further to this, Chamorro noted privacy concerns with the new Californian regulation, the California Consumer Privacy ACT (CCPA), which was a response to the fallout from Facebook’s own misuse of data. Chamorro said that California could almost be considered an independent country, with the fifth-largest economy in the world.
“What’s happening there is about data privacy, and you’ve got a bit over a year to get compliant with it, once it’s finished in all of its forms.”
He continued that the legislation will, almost certainly, play out in other US states as well, and there may even be a Federal equivalent, which will mean that those doing business within the States will have to observe similar obligations to those enforced by the European Union’s GDPR.
For now, however, the regulation will affect ‘just’ 500,000 businesses in the US.
According to Chamorro, the three most-notable differences in the global approach to data regulation are that:
In the USA, a commodity is something that can be commercialised.
In the UK, it is seen as something to be protected.
In China, it is something to be controlled.
When looking at the US-China relationship, Chamorro described it as something that is ‘cyclical’, with a focus on the issues of ‘doing the business’.
The US-China trade relations issue is something he believes has just come to the end of a relatively civil cycle.