Global growth opportunities could outweigh various risks if those risks are managed properly, said Marsh recently when releasing its 2023 Political Risk Report.
The report, published by Marsh Specialty, identifies four areas where increasing risk threatens global trading, security, and investment environments into 2023: persistent political instability; economic retrenchment; competition for strategic resources; and supply chain diversification.
According to the report, the global political and economic environment is likely to remain fragile throughout 2023, as a number of factors work in concert to compound the impact of global risks.
For example, persistent political instability, especially when compounded by the impact of inflation, threatens the economic and investment environment and, in some cases, the societal structure of emerging markets, the insurance broker noted.
The World Economic Forum's Global Risks Report 2023, published in partnership with Marsh McLennan and others, calls this compounding effect of related global risks "polycrises," noting that such polycrises have turned the focus of nations inward, Marsh added.
The Political Risk Report identifies this inward focus on economic security, which often comes at the expense of free trade, as another major shift threatening global trade, security, and investment, and warns that decisions made by key economic powers on various issues — ranging from fertilisers and microchips to the energy transition — will continue to have global repercussions, the firm said.
However, despite the current elevated risk environment, there are clear signs that the perceived level of risk exceeds actual risk levels and that at least four significant global economic growth drivers could fuel economic recovery and improve security, according to Marsh.
The lockdown backlog of infrastructure investment points to a rise in future activity and expansion globally, while the push to meet 2030 net-zero energy transition goals will see a range of innovative investment activity, Marsh pointed out.
The need to diversify supply chains to achieve greater food and energy security will continue to attract investment opportunities, as will the substantial rise in government defence spending worldwide to support allies, counter threats, and accelerate the sector’s modernisation, the firm observed.
“While it may be unnerving, there are many global growth opportunities in today’s elevated geopolitical and economic risk environment,” said Nick Robson, Global Head of Credit Specialties, for Marsh Specialty. "If the risks are identified, managed, and mitigated effectively, the prospects for short, medium, and long term growth frequently outweigh the risks presented by short term volatility.”