RISK was everywhere at the World in 2014 Summit in New York this past week. Fortunately for Cassandra, that didn’t mean actual physical danger, but political, economic or business risk featured in almost every panel discussion.
Economically, predictions were mixed. Jacob Frenkel of the Group of Thirty, a consulting firm, was bullish on American growth prospects for the coming year but sounded warning bells for the longer term if Social Security and health care aren’t tackled soon. Currently, health care is the fastest-growing component of the federal budget, he said, and combined with Social Security makes up about 50% of the total budget, leaving half for everything else. As America’s population ages, that figure is likely to rise to more than 60%. Unless the social contract is rewritten, Mr Frenkel warned, “by 2035 we’ll hit the wall.”
Leo Abruzzese of the Economist Intelligence Unit described 2014 as a year of risk and recovery as far as the global economy is concerned. The rich world—that is America, Japan and the euro area—will, for the first time in at least four years, all grow (albeit in Europe’s case not by much). But emerging economies face tougher times as investors, encouraged by stronger growth in developed economies and the prospect of less Federal Reserve money in the markets, move their money elsewhere.
The coming year will see almost 40% of the world’s population head to the polls. All 28 members of the European Union will vote to elect a new European Parliament and Jacob Rosengarten of XL Group, an insurance company, predicted that as much as a third of the vote could go to far-right parties which want to dismantle the union.
In emerging markets, Mr Rosengarten expects mass demonstrations like those seen in Brazil and Turkey during 2013, fuelled by an emergent and disgruntled middle class, will continue next year if governments fail to invest in education and infrastructure. Technology now enables protests to erupt almost instantly and political leaders will have to tread carefully if they want to keep the peace.
For business, panelists mentioned several risky areas, including the costs of an ageing workforce, the effects of climate change on the supply chain and regulatory uncertainty. But the issue that keeps corporate America tossing and turning at night is cyber-crime. It is expensive: according to the Ponemon Institute, an outfit which researches digital matters, organisations experience an average of 122 successful attacks a week, which take an average time to resolve of 32 days at a cost of $32,469 a day. And they are almost impossible to fight.
Some businesses are now looking for ways to indemnify their organisations against the risk of cyber-criminals. Tom Fitzgerald of Aon, an insurance company, said that his company anticipates taking over $1 billion in cyber-insurance premiums this year but many businesses still ignore the threat. Another panelist, Karen Berigan of Crown Holdings, a packaging and container manufacturer, said that only about 30% of American companies buy cyber-risk insurance.
Whose responsibility is it anyway? Nancy Wolk, chief information officer of Alcoa, an aluminum manufacturer, argued that everyone must bear some responsibility for fighting cyber-crime. The scale of the problem—one panelist estimated that there were anywhere between 18m and 24m forms of malware, programs designed to damage a computer, swirling around the ether—makes it almost impossible for companies to fight alone. The panelists doubted whether governments will do enough to tackle the problem, although Howard Mills of Deloitte, a professional-services company, argued that some of the legislation that has been passed has been helpful. But much more needs to be done.
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