It’s that time again –the barrage of top-risks lists and forecasts for the coming year. When the air has cleared in a few weeks, I’ll issue my fourth annual “top gray rhino risk” meta-analysis: sorting through dozens of lists and identifying trends among them. (Here’s my 2018 wrap-up with links to past lists.)
But this week, I want to focus on a few of my favorites and the worries that they detail.
You may have caught the news Monday that China’s President Xi Jinping warned senior Communist Party officials to stay alert for gray rhino risks, among which he mentioned debt-laden “zombie firms,” real estate, technology safety and the need for legislation addressing new technologies, financial markets, and external factors.
The “bad seeds” of geopolitical conflict headline Eurasia Group’s Top Risks 2019 list: fissures in NATO, the G20, the WTO, and other multilateral groups, that are in early stages now but could rapidly deteriorate and spark a major crisis. EG doesn’t see them as urgent right now –but if they do become urgent their impact will be huge.
Deteriorating US-China relations are second, as the world’s two most powerful economies shift positions. In third place are cyber security risks, both data breaches and the use of cyber tools as geopolitical weapons. European populism and US domestic politics come in fourth and fifth.
EG’s list is global and encompasses both political and economic risks.
I like the way the World Economic Forum Global Risks Report 2019 separates top risks by likelihood and potential impact and graphs them; the top right-hand quadrant of highly likely, high impact risks is where gray rhinos live.
Most likely, highest-impact were extreme weather events and failure of climate change mitigation and adaptation. Data fraud and cyber theft, at fourth and fifth most likely, and asset bubbles in a major economy (in tenth place) were the only three on the “top most likely” list that were not related to climate change and the environment.
Like EG, the GRR is global in scope and includes both economic and political/social risks, though its emphasis on economic threats is somewhat higher.
Similarly, the Council on Foreign Relations Preventive Priorities Survey 2019 groups risks by likelihood and impact –though it defines impact through a US interests centric lens. Unlike the other lists, it focuses only on more traditionally defined security risks –the ones that might involve guns and bombs or other attacks.
On CFR’s high-impact, moderately likely list are cyberattacks, renewed tension on the Korean Peninsula, a US-Iran conflict, the South China Sea, and a major terrorism attack in the US. CFR’s high-likelihood, moderate impact list includes Syria, Venezuela, Yemen, and Afghanistan.
Of the thirty top worries on its list, 26 were also on the 2018 list. The four that were not are worsening civil conflict in Cameroon, a new military confrontation between China and India, political violence and instability in Nicaragua, and a crisis between the United States and China over Taiwan. They replaced four instances that dropped off the list: Pakistan, the East China Sea, the Sahel, and Kenya. (The survey was done last November so pre-dated the recent Riverside attack in Nairobi.)
CFR updates conflict data throughout the year at cfr.org/globalconflicttracker.
Technically not a list of risks, Byron Wien’s Top 10 Surprises is one of my favorites anyway because of its logic: for what events might markets be underestimating their probability?
Top on his list is the possibility of the Fed stopping its monetary tightening. Second, he predicts the S&P 500 will be up 15 percent for the year. Third, he predicts that capital spending and housing will make modest gains in 2019, but consumer and government spending will continue to drive economic growth.
He sees the price of gold falling to $1,000 and emerging markets attracting new investment. Wien predicts that the Shanghai composite will rise 25 percent.
It’s an unusual contrast to the other lists I tend to look at, since in Wien’s view the risk is not being in the game.
Though I look more closely at debt and political dynamics so am not so sanguine, you may already know how much I appreciate alternative views and a healthy debate.
What do you see as the biggest risks of 2019? I’d love to hear.
#risk #toprisks #2019 #cyber #geopolitics
This article is part of my new weekly LinkedIn series, “Around My Mind” – a regular walk through the ideas, events, people, and places that kick my synapses into action, sparking sometimes surprising or counter-intuitive connections.
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- THE GRAY RHINO Kindle edition $2.99 until end-July - July 11, 2020
- Moneywise Guys: Why You Should View the S&P 500 Rebound with Caution - July 1, 2020
- Debt and Society: Newly Timely Historical Perspectives - July 1, 2020
