Part 4: Risks for Doing Business at a Glance
Building resilience against global risks necessitates consensus in identifying the risks that should most concern different stakeholders across regions and countries. The final part of The Global Risks Report therefore focuses on the impact of global risks on the business community across different regions and countries. It draws on the views of executives in 140 economies covered by the World Economic Forum’s Executive Opinion Survey (see Box 4.1) about the risks of highest concern for doing business[fn1]The results presented thus far are drawn from the Global Risks Perception Survey; the results presented here in Part 4 are derived from another survey, the Executive Opinion Survey (see Appendix C).[/fn]
Box 4.1: The World Economic Forum’s Executive Opinion Survey
Every year since 1979, the World Economic Forum has conducted its Executive Opinion Survey (EOS). Capturing executives’ perspectives on a broad range of socio-economic issues, the EOS primarily informs the World Economic Forum’s annual Global Competitiveness Report and its derivatives. The 2015 edition of the EOS, conducted between February and June 2015, surveyed over 13,000 executives in 140 economies. EOS respondents were asked to select the five global risks that they were most concerned about for doing business in their country within the next 10 years, choosing from the set of 28 global risks presented in the The Global Risks Report 2015..1 See Appendix C for details of the methodology and the EOS.
The fact that today’s businesses are global is not news, but the extent of the globalization of trade and commerce – and the risks it presents – is far from understood. Foreign direct investment (FDI) inflows have increased a staggering 25-fold since 1980, rising from US$54 billion to US$1.23 trillion in 2014,2 as marked by shifts from manufacturing to services and from developed to developing and emerging markets. Indeed, South-South investments (that is, investments from one developing economy to another) have intensified, growing by two-thirds, from US$1.7 trillion in 2009 to US$2.9 trillion in 2013.3 Information and communications technologies (ICTs) have internationalized supply chains, linking trade and investment ever more tightly.4 While offering companies opportunities to lower production costs and countries the chance to develop economically by participating in global value chains, the internationalization of business increases exposure to global risks. From environmental to economic and political risks, companies are vulnerable even if they have no immediate presence in the geography where the risk arises.5 The resilience of any individual business depends heavily on the resilience of its suppliers and purchasers, whose supply chains can span many countries.
Increasingly, businesses need to strengthen their scenario and emergency planning capacity to analyse complex and often uncertain interdependencies if they are to build resilience to global risks. Likewise, countries also need to understand the global risks to doing business. Globally, FDI inflows fell by 16%, from US1.47$ trillion in 2013 to US1.23$ trillion in 2014 – well below the pre-crisis 2007 peak – for reasons that include perceptions of global economic fragility, government policy uncertainty and elevated geopolitical risks.6
This part of The Global Risk Report 2016 therefore aims to provide insight for both business and policy-makers by drawing on the findings of the Forum’s Executive Opinion Survey (EOS) about the risks for doing business in 140 economies. It takes the global risks discussed in previous chapters to the country level and analyses regional trends, country-specific responses and presents deep-dives into the five often-cited risks of highest concern.