• Thursday, July 18, 2024
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Prepare for growing threat of geopolitical conflicts, businesses urged

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The Cambridge Centre for Risk Studies has urged organisations to factor geopolitical conflicts into their business continuity plans as the threat of trouble grows across the world.

According to Andrew Coburn, director of Advisory Board, Cambridge Centre for Risk Studies, Judge Business School, the risk of geopolitical conflict across the world ‘continues to grow in this new era of political uncertainty’.

“Businesses should reappraise their readiness to manage possible disruption to their activities from armed conflicts in different parts of the globe,” he said at a briefing in London.

The Centre for Risk Studies and its research partner Cytora Ltd explained at the event that they have identified more than 100 potential country-to-country conflicts based on recent antagonist statements, historical hostility and unethical values.

They all have the potential to cause ‘severe disruption’ to business activities, said the centre.

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At its briefing the Cambridge Centre for Risk Studies said that its stress tests reveal that a major regional conflict could cause damage to the world’s economy as severe or worse than the financial crisis of 2008.

Cytora’s risk map of potential future conflicts highlights a number of regional hot spots. These include the Middle East, central and eastern Africa region, the eastern European margins, the Indian subcontinent, parts of Latin America and the emerging Southeast Asian powers.

“The threat to the global economy is most severe from outbreaks in Southeast Asia, due to the trade linkages there, but conflicts in the Russian hinterland could have severe impacts on the energy sectors and commodities,” said Coburn.

As the world’s second and third largest economies, a conflict between China and Japan would result in the worst economic damage to international trade, according to the centre.

Its scenario testing reveals that the world’s GDP output would fall by between $17tr and $32tr than currently expected over the next five years should war break out between the two economic powerhouses. The capital markets would be badly hit and investment portfolio returns could be reduced by 20-50 percent, it added.

Coburn stressed that this not a prediction but rather a scenario of a highly unlikely, but not impossible, set of events.

Its conflict scenarios are based on, and allow for, organisations stress testing their business continuity plans and strategies for surviving the financial and counterparty challenges that result.