Resiliency to geopolitical risks is slipping, business leaders indicate

Fewer business leaders across the U.S. and U.K. are confident in their organizations’ ability to handle the most pressing geopolitical risks, including war, inflation and economic uncertainty, according to a survey by Beazley Group.

For example, the share of respondents that ranked war and terror as their top risk increased 46% compared with 2021. However, 10% fewer business leaders reported feeling ‘very prepared’ to face these risks, according to Beazley. The survey was conducted shortly before Russia invaded Ukraine.

Similarly, 31% more executives ranked economic uncertainty as a top risk this year compared with 2021, but 8% fewer said they were very prepared to face these threats.

“Against a challenging backdrop, business strategies are now at a point of inflection,” Roddy Barnett, head of political risks & trade credit, at Beazley said in a release. “Even those territories far removed from the theatre of war in Eastern Europe are feeling the impact of global sanctions and commodity shortages on risks across the board from supply chain to cyber to political risk and trade credit.”

Inflation pressures

Inflation has become a major threat, but more than half of business leaders in the U.S. and U.K. said they lacked the resiliency to deal with it, according to Beazley. When breaking out just U.S. respondents, 65% said they were unprepared to face risks from inflation.

With inflation and economic uncertainty expected to remain a high threat throughout the year, commercial insureds will see a heightened need for D&O and trade credit coverages, Beazley reported.

During S&P Global Ratings’ Annual Insurance Conference, Chubb Ltd. CEO Evan Greenberg noted global inflation and geopolitical risks are intertwined. He said energy and food shortages caused by the Russia-Ukraine war will lead to developing nations taking more energy, while poorer countries will suffer. As a result, energy and food insecurity in those countries will result in instability, greater nationalism and higher geopolitical risks in those regions. This will be a challenge for companies such as Chubb that write trade credit coverage.

Inflation has already led to instability and civil unrest in Sri Lanka, and countries such as Egypt and Turkey are similarly vulnerable, Beazley reported, adding businesses should actively prepare for this threat now.

Related:

• Shoring up global risk management strategies in times of war
• The role lawyers have in insurance risk management during Russia-Ukraine war
• The 10 most dangerous cities in the U.S.