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The Top Ten Global Risks Facing Businesses

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The Top Ten Global RisksFacing Businesses

By Warwick Knowles,Senior Economist at Dun & Bradstreet

Risks remain geographically spread and diverse. Risks associated with trade, politics, economic developments, new technology and climate change mean that businesses have to prepare for – and combat– the impacts of an increasingly complex and globalised world. This applies to finance, procurement and supply-chain teams across all business sectors.

The last three years have been particularly challenging for businesses. The vast range of risks, including significant tensions between the US and China, as well as Brexit uncertainty, are still generating problems that will have ramifications for businesses globally. This makes it essential for businesses to track and manage these multiple threats– or risk damaging both their finances and their reputation.

Here, we highlight the top ten global risks for businesses, as identified by our Global Business Impact assessment.

Risk levels are above the long-term average

Overall, our Global Business Impact assessment has worsened for a fourth successive quarter, with an increase from 270 (out of a maximum 1,000) in Q4 2018 to 279 in Q1 2019. This is the highest level since Q4 2016, and is also well above the long-term average (249.9). These developments all point towards a deterioration of the global business operating environment.

Highlighting the ever-evolving nature of the global environment, there are five new entries in Dun & Bradstreet’s Q1 2019 assessment of the top ten global risks. Two of the new risks stem from our West and Central Europe region, while there are also new risks in our Latin America, Asia-Pacific, and Pan-Regional categories.

The five new-entry risks are:

  1. European elections this weekend with strong gains for anti-EU parties
  2. Risks to ecosystems and the threat of extreme weather events materialise much faster than anticipated
  3. Investment in Brazil’s mining sector declines
  4. The UK leaves the EU in a disorderly fashion
  5. The continuation of an ‘America First’ policy stance in Washington increases tensions

Trade risks are not going anywhere, for now

Trade risks continue to dominate in Q1 2019, as they did in the previous quarter: three of the top ten risks are associated with trade and with the increasing levels of risk for cross-border business, supply chains and business profitability.The number one risk is the concern that US tariffs hit profits and tax revenues in China as the trade war stalemates. Contagion from bad debts then triggers a rapid slowdown in China, overwhelming policy moves to stabilise the economy, with a consequent negative impact on global growth.

The second-highest trade-related risk is that negotiations fail to stop an escalating US-China trade war, with negative secondary effects counterbalancing new opportunities and acting to cool global trade growth.

Finally, the third trade-related risk (and new to the top ten) is that the UK leaves the EU in a disorderly manner, causing disruption to supply chains – mainly in Europe, but globally too.

A prominent political strain

A new and noteworthy risk in the top ten is the concern that the European elections this week will end with strong gains for anti-EU parties. This outcome would only complicate policy-making within the EU, undermining the business environment.

The second political risk,and another new entry, is that a continuation of the ‘America First’ stance in US foreign policy alienates traditional allies and therefore increases tensions. The global political environment would then become more hazardous, increasing cross-border difficulties for businesses.

New economic fears

There are two economic worries posing significant risks to businesses globally. The first risk is that pan-regional growth in global debt will trigger a fresh debt crunch. This risk, which is in sixth place in the top ten, would create a systemic banking crisis and prompt the global economy to contract.

As lightly lesser risk, originating from Latin America, is that lower investment in Brazil’s mining sector (following the latest dam disaster at Vale) could drive up global iron ore prices and those for other metals, significantly increasing the cost of inputs for industrial products.

Pan-regional issues play a part

The final three factors are all pan-regional: two relate to climate and the third to technological developments.The first risk here is that rapidly-growing cyber-dependence and connectivity will lead to more frequent and damaging cyber-security issues, with ramifications for doing business.

Secondly, the instability of the Northern Hemisphere jet-stream could continue to create persistent, anomalous weather patterns across the hemisphere, increasing costs for the public and businesses.

The last – but by no means the least – global threat to businesses is another climate-related risk. The risk here is that hazards associated with ecosystems and extreme weather events (as forecast by the Intergovernmental Panel on Climate Change) materialise much faster than the consensus view anticipates, with systemic impacts at the global level.

As new risks for businesses come to light and worsen, decision-makers must monitor the global business environment continually and carefully ahead of the expected slowdown in the global economy.

The geographical spread and diversity of risks related to trade, politics, economic developments, new technology, and climate makes the business environment increasingly challenging. It is important for businesses to continuously monitor the progress of these risks, using the latest data and analytics to assess and manage any potential business threats. A careful and measured approach to managing risks is key to navigating through these uncertain times.

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ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion

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ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion 1

(Reuters) – Exxon Mobil Corp said on Wednesday it would sell its non-operating interest in its UK and North Sea exploration and production assets to private-equity fund HitecVision for more than $1 billion.

Exxon has been looking to sell its oil and gas assets since late 2019, seeking to free up cash to focus on a handful of mega-projects.

The deal includes ownership interests in 14 producing fields operated primarily by Shell as well as interests in the associated infrastructure. Exxon could also receive about $300 million in contingent payments based on a potential for increase in commodity prices.

Exxon’s share of production from these fields was about 38,000 barrels of oil equivalent per day in 2019, the company said.

Exxon said it would retain its non-operated share in upstream assets in the southern part of the North Sea as well as its interest in the Shell Esso gas and liquids (SEGAL) infrastructure, which supplies ethane to the company’s Fife ethylene plant.

HitecVision, in partnership with Eni, had bought Exxon’s Norwegian North Sea assets for $4.5 billion in 2019.

Initially, Exxon hoped to raise more than $2 billion from the sale, which was planned for late 2019. In June 2020 sources told Reuters that the portfolio was more likely to fetch $1 to $1.5 billion given the oil price weakness last year.

(Reporting by Arathy S Nair in Bengaluru; Editing by Anil D’Silva)

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JPMorgan’s blockchain payments test is literally out of this world

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JPMorgan's blockchain payments test is literally out of this world 2

By Anna Irrera

LONDON (Reuters) – Stuck in space with bills to pay? Don’t worry, the satellites could take care of it.

JPMorgan Chase & Co has recently tested blockchain payments between satellites orbiting the earth, executives at the bank told Reuters, showing that digital devices could use the technology behind virtual currencies for transactions.

The so-called Internet of Things (IoT), where devices connect to one another, is most associated with consumer electronics, including smart speakers like Amazon Echo and Google Home, and banks want to be ready to process payments when these smart devices start doing transactions autonomously.Umar Farooq, the CEO of JPMorgan’s blockchain business Onyx, thought space was a cool place to try it out.

“The idea was to explore IoT payments in a fully decentralised way,” Farooq said. “Nowhere is more decentralised and detached from earth than space.”

“Secondly we are nerdy and it was a much more fun way to test IoT,” he said.

To run the space experiment, the bank’s blockchain team did not send its own satellites into space, but worked with Danish company GOMspace, which allows third parties to run software on its satellites.

Farooq said the satellite test showed blockchain networks could power transactions between every day objects.

The test also showed it could be possible to create a marketplace where satellites send each other data in exchange for payments, as more private companies launch their own devices into space, Tyrone Lobban, head of blockchain launch, at Onyx said.

Back on earth, examples of IoT payments that could become a reality sooner include a smart fridge ordering and paying for milk on an ecommerce site, or a self-driving car paying for gas Farooq said.

Blockchain, which first emerged as the software underpinning cryptocurrencies, is a shared digital ledger of transactions. Financial companies have invested millions of dollars to find uses for the technology hoping it can reduce costs and simplify more complex IT processes, such as securities settlement or international payments.

But so far, blockchain has yet to have widespread impact in financial services.

JPMorgan has been one of the most active banks in blockchain, announcing it had created its own distributed ledger called Quorum in 2016, which was sold to blockchain company Consensys last year. The bank also developed a digital coin called JPM Coin and in 2020 created Onyx.

Onyx has more than 100 employees and its blockchain applications are close to generating revenues for the bank, it said.

Among the division’s applications is Liink, a payments information network involving more than 400 banks, a project to replace paper checks and IoT experiments, Farooq said.

(Reporting by Anna Irrera. Editing by Jane Merriman)

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Garment workers in Thailand receive full compensation after wages expose

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Garment workers in Thailand receive full compensation after wages expose 3

By Nanchanok Wongsamuth

BANGKOK (Thomson Reuters Foundation) – Garment workers in Thailand who were illegally underpaid while making products for major brands have received all the wages owed to them after theme park operator and film producer Universal Studios agreed to pay the outstanding amount.

Universal Studios, owned by media giant Comcast Corp’s NBCUniversal, agreed to give $20,000 to a group of Myanmar workers on Wednesday – following three other global brands in making payments to settle the 3.5 million baht ($116,550) owed in unpaid wages.

“We take this matter very seriously and this is not in line with our core values,” a NBCUniversal spokeswoman said.

A Thomson Reuters Foundation investigation in September 2019 found dozens of migrants from Myanmar working at several factories in the western region of Mae Sot were paid less than the daily minimum wage of 310 Thai baht ($10.32).

A group of 26 workers at one of the factories raided in 2019 by officials sued the owner – Kanlayanee Ruengrit – in August last year for failing to pay the 3.5 million baht owed to them.

Interviews with workers by local and global rights groups found that her factory was making goods for several major brands from Universal Studios to Britain’s largest supermarket Tesco.

The workers later received a payment of about 2.88 million baht from Kanlayanee and three brands that said Kanlayanee’s factory had been subcontracted by their suppliers or partners without permission – Disney, Starbucks and Tesco.

The money from Universal Studios will be paid to MAP Foundation, which has supported the workers and been in discussion with the companies, and will distribute the funds directly to the workers.

“Since the former licensee has failed to respond to multiple requests to pay the affected Thai factory workers, we are making a goodwill donation to MAP Foundation … to distribute funds directly to the workers,” the NBCUniversal spokeswoman said.

Suchart Trakoonhutip, a coordinator at MAP Foundation, said the payment marked the first time that underpaid workers in Mae Sot had received the full amount owed to them in a wage dispute.

The Mae Sot case sets an example for other brands to follow in terms of taking responsibility, but workers should not have to rely on the goodwill of companies in order to receive money they have earned, said Ilona Kelly, a coordinator at pressure group Clean Clothes Campaign.

“The industry urgently needs binding agreements to hold brands to account, the lack of which has become even more notable during COVID-19 as millions of workers are now owed wages and severance pay,” she added.

“Without (government) legislation, the happy ending of the Kanlayanee story will continue to be as unobtainable as a fairytale ending for most workers.”

One of the Kanlayanee workers, who now works part-time on a farm, told the Thomson Reuters Foundation that he plans to send the additional money to his sick father in Myanmar.

“I feel happy and proud that I will soon receive the full amount of money I am owed,” said the worker, who spoke on condition of anonymity due to the sensitivity of the matter.

($1 = 30.0300 baht)

(Reporting by Nanchanok Wongsamuth @nanchanokw; Editing by Michael Taylor. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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