Risky Business and the Need to Get the Context Right

World leaders in politics, academia and business are meeting in the coming weeks in Davos at the World Economic Forum (WEF). Each year before the Summit, WEF publishes a report about what business leaders estimate to be the biggest risks of the coming year.

The Global Risks Report 2019 is published against the backdrop of increasing – and worrying – geopolitical and geo-economic tensions. “If unresolved, these tensions will hinder the world’s ability to deal with a growing range of collective challenges, from the mounting evidence of environmental degradation to the increasing disruptions of the Fourth Industrial Revolution” the report summarizes.

Three out of the top 5 risks are related to the environment. Extreme weather, failing climate policy and natural disasters are followed by topics on cybersecurity. Geo-political and geo-economic tensions are on the rise and 85% of the respondents expect power-political confrontations.

Last week the Eurasia Group, a company focused on political risk analysis, advisory and consulting, also published their report on political risks. In the Report on risks for 2019 they highlight the following:

     
  • An Innovation Winter: We’re heading for a global innovation winter—a politically driven reduction in the financial and human capital available to drive the next generation of emerging technologies.
  • The Cyber Gloves are coming off: Hackers have grown more sophisticated, societies have become heavily dependent on digital services, and efforts to agree on basic rules of the road for cyber conflict have gone nowhere.
  • The Broken US-China Relationship: Something fundamental has broken in the relationship between Washington and Beijing. There is a fear that this can’t be put back together, regardless of what happens to the economic ties between the US and China.
  • European Populism: 2019 will show that populists and protest movements are stronger than ever.
  • Brexit: Brexit promises to keep the UK distracted in 2019. But will there actually be a Brexit? And if so, what flavor?

These topics are occupying the minds of company leadership teams and boards when navigating businesses in a complex and unstable political world.

There is a growing need for business leaders to get their broader context right. They need to understand the environment not only with a competitive market in mind, but also in a cultural, political, social, environmental and historical context.

This means that companies need to define and articulate their worldview. Depending on the nature of the business, the need to speak up on policy and politics, is growing.

The era when the business of business is business, is over.
Taking a political stand is also a way to differentiate and create an identity. It can also be a manifestation of a company culture and a way to communicate that culture.

The growing concern of global warming is a topic no-one can avoid. All businesses need to evaluate their role in this context.

And where there is pressure there is also opportunities. In the industrial era linear thinking dominated. In the Fourth Industrial Revolution circular thinking will enter boardroom discussions. The Circular Economy will open up opportunities for new business models and cause new business to emerge.

It will be interesting to see how the discussions in Davos will evolve. One thing is clear, companies need to get their context right.

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