The COVID-19 outbreak, emerging digital threats, climate change and the US-China relationship are among the top five risks for businesses in 2021, a specialist global risk consultancy, Control Risks has published.
According the 2021 Control Risks’ annual RiskMap report, underpinning these risks, the danger of missing the rebound in a year of multi-speed recovery is a top risk for business in the coming year.
“There’s no doubt that businesses will continue to face considerable disruption from the COVID-19 pandemic, but we believe that the opportunities are real and exciting for many companies in 2021,” Nick Allan, chief executive of Control Risks said.
The report said all top five global risks are present in Africa but they play out in unique ways.
In some areas the continent presents a positive break from the more negative global trends, such as in the regional co-operation shown by the continent in its response to COVID-19 and the planned launch of the African Continental Free Trade Area (AfCFTA).
Overall, however, 2021 will be a tough year for a continent that will struggle to recover from COVID-19 as fast as much of the rest of the world. Despite many significant opportunities for investors, the markets in which they are investing will be characterised by significant operational and political uncertainty.
The investors that will achieve success in 2021 are those that understand that Africa’s post-pandemic landscape will be tangibly changed from what came before, presenting different challenges and new opportunities.
The global top five risks for businesses in 2021
The top five risks are released as part of Control Risks’ annual RiskMap report, a global risk forecast for business leaders and policy makers across the world, published Tuesday (12 January 2021).
A world with long COVID
2021 will be a year of uneven recovery as vaccine rollouts create a world of haves and have-nots, with pockets of For Ever COVID at the bottom of the pecking order.
Much of Africa, unfortunately, will be in the have-nots category and companies will face prolonged operational uncertainty as localised restrictions are imposed sporadically in response to virus spikes.
Africa’s economic recovery will also be more gradual, as governments with limited fiscal headroom cannot engage in sustained stimulus spending and must rely instead on underdeveloped private sectors to drive their recoveries.
US-China: stabilisation sans normalisation
While 2021 should see superficial stabilisation in the US-China relationship, the straining of the international rules-based system seen over the past few years will not go into full reverse.
Competition rather than co-operation will remain the norm in international relations.
In this regard at least Africa represents a welcome break from global trends, as 1 January brought the launch of AfCFTA.
And although full implementation of a continental free trade area will be slow, the fact that Africa is moving in that direction when much of the world is not should be attractive to potential investors.
Go green or go bust
An inflection point is coming for the relationship between businesses and climate change in 2021. No organisation can now afford not to take a stance.
The environment is a critical aspect in a broader area of the ESG agenda. Although no African country other than South Africa has made a net zero pledge to date – without special funding, governments do not view it as a priority – the continent nonetheless has huge renewable energy potential.
Renewable energy projects connected to microgrids make sense in a continent of small population centres spread over huge areas, and the recent liberalisation of energy markets in many countries has opened up multiple opportunities for private-sector investors.
Without government backing, however, investor may ignore these opportunities for the subsidies and support on offer elsewhere.
Digital acceleration hits emerging threats
The remarkable increase in connectivity across Africa – in mobile phone penetration, internet penetration, social media use and data traffic flows – has opened up a vast array of new opportunities. This is evidenced by the rapid growth in the African tech sector over the past few years. But this connectivity also brings risks.
Cybercrime has boomed across Africa, from simple scams to sophisticated attacks on critical infrastructure. Criminal and state actors have also engaged in influence operations, spreading misinformation and inflammatory content that poses reputational risks to companies as well as political players.
Companies in Africa, just like the rest of the world, will have to balance the drive for technological innovation with security, integrity and resilience challenges.
Missing the rebound
The coming year will bring strong GDP growth in multiple markets, the roll-out of vaccines and a world hungry to start living again. While progress will be faltering, an uplift is coming – do not miss the rebound.
If 2020 was about survival for many companies, 2021 is the time to focus on opportunity. Under the pressure of COVID-19 many companies have flexed, not broken. Through innovation, rapid technology adoption and streamlining, they have emerged stronger, while weaker competitors have fallen.
Those companies that turn the efficiency gains of 2020 into productivity gains, continue to accurately assess trends and show flexibility in adapting their operations will benefit from the coming surge in demand.
“Governance, policy consistency and rule of law are critical for investors in Africa and deep-rooted challenges remain across the continent in this realm, however we do see positive change across the region,” said Tom Griffin, partner for Africa and Middle East at Control Risks.
“Recovery will be an opportunity for governments to address structural constraints and promote new approaches and technologies – the region remains front and centre for many of our clients.
“For Control Risks, Africa sits at the heart of our past, present, and future – we continue to invest and see growth across the region,” he said.