Economies around the world are reopening and companies are carefully reassessing and planning their post pandemic business models. However, there are yet many concerns that are keeping risk professionals up.
A survey of the World Economic Forum participated by 350 senior risk professionals from all over the world identified prolonged recession of the global economy as the most worrisome and concerning fallout over the next 18 months.
In the survey respondents were asked to select eight risks from a list of 31 that they considered to be
Results
Eight of the most likely fallouts for the world from the COVID-19 crisis over the next 18 months are prolonged recession of the global economy, surge in bankruptcies (big firms and SMEs) and a wave of industry consolidation, failure of industries or sectors in certain countries to properly recover, high levels of structural unemployment (especially youth), tighter restrictions on the cross-border movement of people and goods, weakening of fiscal positions in major economies, protracted disruption of global supply chains and economic collapse of an emerging market or developing economy.
Eight of the greatest concerns for the world from the COVID-19 crisis over the next 18 months are prolonged recession of the global economy, high levels of structural unemployment (especially youth), another global outbreak of COVID-19 or different infectious disease, weakening of fiscal positions in major economies, failure of industries or sectors in certain countries to properly recover, surge in bankruptcies (big firms and SMEs) and a wave of industry consolidation and tighter restrictions on the cross-border movement of people and goods.
Eight of the most worrisome risks for companies from the COVID-19 crisis over the next 18 months are prolonged recession of the global economy, surge in bankruptcies (big firms and SMEs) and a wave of industry consolidation, cyber attacks and data fraud due to a sustained shift in working patterns, failure of industries or sectors in certain countries to properly recover, protracted disruption of global supply chains, tighter restrictions on the cross-border movement of people and goods, another global outbreak of COVID-19 or different infectious disease and economic collapse of an emerging market or developing economy.
Across all three sections, prolonged recession of the global economy was the greatest risk and most worrisome for a company and they should start preparing to handle such preparations. If a situation like this arises, an expert's suggestion to a company is to prioritize loyalty toward the employees. This will enhance the sense of ownership of the employees and will motivate them to work harder to keep the company up and running.
Another top concern is the surge in bankruptcies (big firms and SMEs) and a wave of industry consolidation. It is feared that many companies are likely to file for bankruptcy. This can potentially lead to industry consolidation where big companies will buy out small companies which will in turn lead to oligopoly in some industries where a handful of companies will control the industry, making regulation difficult. The government should design relevant policies to prevent these kinds of oligopolies. Repeated bailouts are less likely to work as it leaves long term stress on the national budget and this is not the kind of cycle any economy wants to fall in. If a large amount of money is spent in bailouts, governments will have to charge more tax from citizens who are already in financial stress and lost parches power to some extent.
Hence, sustainable planning is required from both the company and regulatory bodies. SME’s should be encouraged to make exportable products and the government should work to find markets for them. Digital trading platforms and international trading marketplaces should be incentivized and given responsibility to go out there and find new markets for exportable products. Also, the necessary policies and regulations should be made on priority basis to encourage digital trade because this can reduce the export cost significantly saving the exporting country billions of dollars. This is particularly important because cross border movement is likely to reduce dramatically in coming years.
Automation may rise which can increase structural unemployment. This can also be mitigated by encouraging SMEs to get into the export-oriented business. In Bangladesh 80% of jobs in the industries sector are created by SMEs; so, by creating/finding new international markets and digitizing the trading system, the sectors can boost the SME business in a large scale, increasing the new jobs along the way.
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