The COVID-19 pandemic, emerging digital threats,
climate change and the US China relationship are among the Top 5 Risks for
business in 2021, published today by Control Risks, a specialist global risk
consultancy.
Underpinning these risks, the danger of missing the rebound in a year of
multi-speed recovery is a top risk for business in the coming year.
“There’s no doubt that businesses will continue to face considerable disruption
from the COVID-19 pandemic, but we believe that the opportunities are real and
exciting for many companies in 2021,” comments Control Risks CEO, Nick Allan.
All top 5 global risks are present in Africa but play out in unique ways. In
some areas the continent presents a positive break from the more negative
global trends, such as in the regional cooperation shown by the continent in
its response COVID-19 and the planned launch of the African Continental Free
Trade Area (ACFTA).
Overall, however, 2021 will be a tough year for a continent that will struggle
to recover from COVID-19 as fast as much of the rest of the world. Despite many
significant opportunities for investors, the markets they are investing in will
be ones characterised by significant operational and political uncertainty.
The investors that will achieve success in 2021 are those that understand that
Africa’s post-pandemic landscape will be tangibly changed from what came
before, presenting different challenges and new opportunities.
The global Top 5 Risks for Business in 2020
The Top 5 risks are released as part of Control Risks’ annual RiskMap report, a
global risk forecast for business leaders and policy makers across the world,
published today.
1. A world with long COVID
2021 will be a year of uneven recovery as vaccine rollouts create a world of haves
and have-nots, with pockets of forever COVID at the bottom of the
pecking order. Much of Africa, unfortunately, will be in the have-not category
and companies will face prolonged operational uncertainty as localised
restrictions are sporadically imposed in response to virus spikes. Africa’s
economic recovery will also be more gradual, as governments with limited fiscal
headroom cannot engage in sustained stimulus spending and must instead rely on
under-developed private sectors to drive their recoveries.
2. US-China: stabilisation without normalisation
While 2021 should see superficial stabilisation in the US-China relationship,
the straining of the international rules-based system seen over the past few
years will not go into full reverse. Competition rather than cooperation will
remain the norm in international relations. In this regard at least Africa
represents a welcome break from global trends, as 1 January will see the launch
of ACFTA, and although full implementation of a continental free trade area will
be slow the fact that Africa is moving in that direction when much of the world
is not should be attractive to potential investors.
3. Go green or go bust
An inflection point is coming for the relationship between businesses and
climate change in 2021. No organisation can now afford not to take a stance.
The environment is a critical aspect in a broader area of the ESG agenda.
Although no African country bar South Africa has made a net zero pledge to date
– without special funding, governments do not view it as a priority – the
continent nonetheless has huge renewable energy potential. Renewable energy
projects connected to microgrids make sense in a continent of small population
centres spread over huge areas, and the recent liberalisation of energy markets
in many countries has opened up multiple opportunities for private-sector
investors. Without government backing, however, investor may ignore these
opportunities for the subsidies and support on offer elsewhere.
4. Digital acceleration hits emerging threats
The remarkable increase in
connectivity across Africa – in mobile phone penetration, internet penetration,
social media use and data traffic flows – has opened up a vast array of new
opportunities. This is evidenced by the rapid growth in the African tech sector
over the past few years. But this connectivity also brings risks. Cyber
crime has boomed across Africa, from simple scams to sophisticated attacks on
critical infrastructure. Criminal and state actors have also engaged in
influence operations, spreading misinformation and inflammatory content that
poses reputational risks to companies as well as political players. Companies
in Africa, just like the rest of the world, will have to balance the drive for
technological innovation with security, integrity and resilience challenges.
5. Missing the Rebound
The coming year will see strong GDP growth in multiple markets, the roll-out of
vaccines and a world hungry to start living again. While progress will be
faltering, an uplift is coming – do not miss the rebound. If 2020 was about
survival for many companies, 2021 is the time to focus on opportunity. Under
the duress of COVID-19 many companies have flexed, not broken. Through
innovation, rapid technology adoption and streamlining, they have emerged
stronger, while weaker competitors have fallen. Those companies that turn the
efficiency gains of 2020 into productivity gains, continue to accurately assess
trends and show flexibility in adapting their operations will benefit from the
coming surge in demand.
“Governance, policy consistency and rule of law are critical for investors in
Africa and deep-rooted challenges remain across the continent in this realm,
however we do see positive change across the region. Recovery will be an
opportunity for governments to address structural constraints and promote new
approaches & technologies – the region remains front and centre for many of
our clients. For Control Risks, Africa sits at the heart of our past, present,
and future – we continue to invest and see growth across the region” explains
Tom Griffin, Partner – Africa and Middle East, Control Risks.
