Covid-19 heightens key risks and raises operational threat for several EU countries: Control Risks

The Covid-19 pandemic has heightened political and economic risks, with a bungled recovery and threat of economic paralysis meeting political weakness the top threats, warns Control Risks in a special edition of its Risk Map 2020. Control Risks has also raised the operational risk level for several European countries following Covid-19. This includes the UK, Spain and Germany, which all move from low to medium risk. Italy has seen its operational risk rating move from medium to high. Meanwhile, Italy, the UK and Spain are all running at medium political risk levels. Ireland, Portugal, France and Germany have maintained low levels of political risk. “Putting pressing public health concerns aside momentarily, the Covid-19 pandemic has intensified and accelerated most of the risks and trends that pre-dated the disease. Put another way, we are, for the time being, stuck with the same risks we’ve always had, but more so,” says Control Risks. Its map puts forward the top five risks for 2020 in light of the pandemic. The number one risk is ‘leaders without strategies bungle the recovery’, an extension of the nationalism and populism risks that were already in place. Control Risks said most leaders have “fumbled” some element of their response to the pandemic and most have acted in isolation, with few examples of global cooperation as seen in the financial crisis of 2008. “The pandemic seems to be the moment the world wasn’t waiting for, and apparently wasn’t prepared for either. Perhaps there was no other way. Years of simmering populism, nationalism and protectionism were never going to build the sort of trust and transparency countries need to work effectively with each other in a time of crisis,” Control Risks says. It adds that fragmentation is likely to continue until the end of 2020 and beyond. “World leaders, each in their own patch, will continue to act unilaterally. Companies with global footprints will themselves have to become leaders in navigating a minefield of conflicting political priorities, regulatory regimes and pandemic de-escalation,” states Control Risks. The second top risk – economic paralysis meets political weakness – is an extension of risks for countries running both political instability and economic vulnerability. Control Risks says the pandemic has added countries under extreme pressure to the list. “Watch all of them,” it warns. It says all countries are in uncharted territory but names Brazil, Egypt and Spain as those that face acute political instability or stresses. The third top risk is the fact the pandemic has provided a new driver for activism and civil unrest. Governments will be held accountable for their handling of the crisis, but corporates will also be measured for their performance as leaders and corporate citizens when the world was in crisis, says Control Risks. The risk map also notes that the pandemic has served a blow to Donald Trump’s presidential campaign based on a strong economy. Therefore, uncertainty surrounding the election’s outcome sees the US campaign trail named as Control Risks’ fourth-biggest Covid-19-related risk. Completing the top five is cybersecurity. “Cybercriminals know we’re vulnerable – a spike in ransomware operations globally is adding to an already complex crisis management cycle for many businesses. It won’t stop there,” Control Risks says. It adds that scientific and medical research for Covid-19 vaccines will be at risk of cyberattacks. Control Risks’ top five risks for 2020 in light of Covid-19 Leaders without strategies bungle the response Economic paralysis meets political weakness The drivers of activism are being supercharged Covid-19 and the US campaign trail Cybersecurity The Risk Map 2020 also lays out four scenarios that measure the progress of the pandemic and impact on business. Control Risks says the current state of play sees a clear split, or uneven rebound, between the countries that have the pandemic under control and can begin to stage a recovery, and the countries where transmission is still a risk. Control Risks: Four scenarios to assess levels of disruption for businesses in the pandemic Prolonged disruption: Pandemic spreads widely and globally as containment efforts fail to prevent international and domestic transmission International travel and migration are significantly restricted International supply chains are significantly disrupted due to business and trade restrictions Global economy enters recession Deteriorating security environment in some places due to economic situation and opposition to lockdowns Economic and social strains negatively impact political stability in many countries International and multilateral meetings postponed indefinitely. Uneven rebound: Some countries have brought Covid-19 epidemics largely under control, allowing them to lift restrictions and enter a ‘new normal’ Other countries face rising cases, strained health systems and prolonged restrictions Countries differ in their capacity to cushion economic impacts with fiscal and financial stimulus packages Global economy begins to rebound by late 2020 but many countries remain in recession The security situation worsens in hard-hit countries; foreign nationals and companies are targeted Geopolitical consequences are significant; interstate tensions rise Significant international disputes over access to medical equipment Some international meetings and events take place in late 2020. Fractured rebound: Most countries move to reopen their economies after containing Covid-19 or under social and economic pressure Local and provincial governments periodically reimpose or tighten restrictions to manage surges of Covid-19 cases Some local or provincial health systems remain under significant pressure and lack adequate medical supplies Global growth rebounds sharply by late 2020 – but second-wave risks are elevated Companies face divergent local, national and international approaches to business operations and travel Companies voluntarily take steps to reduce the impact of Covid-19 disruptions along their supply chains Countries better able to contain and manage Covid-19 gain a geopolitical edge over those facing intermittent lockdowns Major international meetings and events remain mainly virtual. Global rebound: Global pandemic brought broadly under control, marked by significant and sustained declines in new cases Business operations resume; restrictions on movement of people and goods gradually relax globally; supply chains and transport links are restored Global GDP rebounds sharply in 2021, but there are prolonged wealth, unemployment and debt hangovers Familiar geopolitical competition resumes Security risks remain elevated until all economies resume growth and employment levels normalise Major international meetings and events resume Effective treatments and/or a vaccine are available but access is limited within and between countries.

Covid-19 heightens key risks and raises operational threat for several EU countries: Control Risks

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