The Global Business Risk Report Q1 2020

Ten Key Global Risks for Businesses

The Dun & Bradstreet Global Business Risk Report (GBRR) ranks the biggest threats to business based on each risk scenario’s potential impact on companies, assigning a score to each risk. The scores from the top ten risks are used to calculate an overall Global Business Impact (GBI) score.

Our latest GBI score sets a new record-high, indicating that the outlook for cross-border businesses is at its worst level since the index was introduced in Q3 2014.

Risks at highest-ever level

In Q1 2020, Dun & Bradstreet’s GBI score has worsened to its highest-ever level, following two quarters of slight improvement. The Q1 score of 318 is now at an extreme level, having trended upwards from its low of 219 only two years previously. This rise indicates the high level of uncertainty facing businesses that operate cross-border. The Q1 score is also well above the long-term average of 258.0.

Four new risks in the global top ten

Our top ten risks combine an assessment of: (i) the magnitude of the event’s probable effect on the global business operating environment, on a scale of 1 to 5 (where 1 is the smallest impact and 5 is the largest); and (ii) the likelihood of the event happening.

Highlighting the ever-evolving global environment, there are four new entries in our Q1 2020 GBRR’s top ten: two pan-regional risks, one from Asia-Pacific, and one from Western and Central Europe. Two of these risks are directly related to the coronavirus outbreak.

The four new-entry risks are:

  1. The coronavirus epidemic is not contained rapidly, leading to a paralysis of China’s economy well into Q2, with stark consequences for China’s customers and suppliers around the world as raw material prices crash and manufactured items become scarcer (GBI of 60, out of a maximum 100);
  2. The further decline of the automotive sector causes problems for Europe’s industrial sector, with knock-on effects for global supply chains (GBI of 30);
  3. The coronavirus becomes a global pandemic, affecting urbanised areas worldwide in emerging-market and advanced countries alike, with unforeseen consequences for mortality, politics and the global economy (GBI of 25); and
  4. US-Iranian tensions lead to actual military conflict between the countries, prompting the closure of the Persian Gulf to oil tankers and pushing oil prices above USD150 per barrel. (GBI of 25).

Among the pre-existing risks in our top ten, four have changed their focus slightly from Q4 2019 to take account of the evolving environment. Of these, the GBI score has worsened for one risk, while the other three have remained the same. The two other pre-existing risk scores have stayed the same as in the previous quarter.

The overall top ten for Q1 highlights the geographical diversity of risks facing businesses in today’s environment, with three risks emanating from North America, two from Western & Central Europe, and one from Asia-Pacific; four pan-regional risks complete the top ten. The types of risk also remain diverse, and are associated with politics (4), the coronavirus outbreak (3), structural issues (2) and economic developments (1). This reinforces the fact that finance, procurement and supply-chain teams across all business sectors need to combat the impacts of an increasingly complex and globalised world.

Coronavirus risks elevated

The outbreak of the novel coronavirus highlights how unexpected events can suddenly change the risk environment for businesses operating cross-border. The outbreak is responsible for three of the top risks in the latest GBRR, including the most significant risk. In first place, with a GBI of 60, is that the epidemic is not contained rapidly, leading to the paralysis of China’s economy well into Q2 and stark consequences for China’s customers and suppliers around the world as raw material prices crash and manufactured items experience shortages.

The latest GBI score highlights that the coronavirus outbreak has pushed the business operating environment to its most challenging level since the index began.
 

The second risk affected by the epidemic is a pan-regional one. Here, a pre-existing risk has changed focus: the risk now is of global equity valuations collapsing because of the coronavirus outbreak and due to unexpected national and epidemiological security barriers to supply chains, trade and investment. As a result, venture capital and commercial real estate markets in prime business centres go into shock. This risk has a GBI of 30 and is ranked equal third.

 

The third coronavirus-linked risk is ranked at equal ninth, with a GBI of 25. In this case we are concerned that the coronavirus becomes a global pandemic, affecting urbanised areas worldwide in emerging-market and advanced countries alike, with unforeseen consequences for mortality, politics and the global economy.

Political factors still affect the risk outlook

Four of the top ten risks in the latest GBRR are associated with politics. Two of these risks are related to President Trump’s recent acquittal in the US Senate’s impeachment hearings. In this context, the highest-placed political risk emanates from North America and is in second place overall, with a GBI of 36. This risk relates to our fear that US-led trade wars continue as protective trade policies persist following President Trump’s impeachment acquittal, negatively impacting global supply chains. The second factor related to the impeachment acquittal is in equal third place, with a GBI of 30. This is our concern that the acquittal produces renewed division among the dominant political parties in the US, making domestic and global policy cohesion more difficult to accomplish.

The third politics-induced risk emanates from Western & Central Europe and relates to potential election victories of far-right parties in Italy and France. This would lead to more complicated policy-making at the EU level, undermining the operating environment for European businesses. This risk has a GBI of 28 and is in sixth position. The final political risk is a pan-regional one, and is in equal ninth place with a GBI of 25. This is our concern that US-Iranian tensions could lead to actual military conflict between the countries, resulting in the closure of the Persian Gulf to oil tankers and pushing oil prices above USD150 per barrel.

Structural impediments

Two risks are concerned with the effects of structural change. In equal third place, with a GBI of 30, is our concern about the further decline of the automotive sector causing problems for Europe’s industrial sector more widely, which would have knock-on effects for global supply chains.

The second structural risk is of economic damage and geo-political harm stemming from technological threats, predominantly driven by artificial intelligence. Threats of cyber-attacks, data theft, fraudulent activities by state and non-state actors, and the risks of outages of information and networks are rising continuously. This pan-regional factor is in equal fifth place with a GBI of 27.

Only one purely economic concern

The final top-ten risk is the only purely economic risk facing cross-border business operations in in this quarter’s GBRR. In equal seventh place, with a GBI of 27, is our concern that the current economic expansion in the US has reached its peak, leading to a turning point in the credit cycle and eventually the US business cycle, in turn impacting global prospects.

Summary: Business environment risk is at record heights

The Dun & Bradstreet Global Business Impact score for Q1 2020 indicates that the risks confronting businesses are at a record-high.
 

Dun & Bradstreet’s Global Business Impact score for Q1 2020 shows that the risks confronting businesses have hit a new record-high, driven mainly by the outbreak of the novel coronavirus: the outbreak illustrates how unexpected events can suddenly worsen the risk environment for businesses operating cross-border. The Q1 2020 score highlights that business decision-makers need to have contingency plans in place for the sudden disruption of seemingly secure supply chains. Furthermore, the geographical spread and diversity of risks related to politics, structural issues and economic developments make the business environment highly challenging.

 

Top ten risks

Ranking Region Risk Likelihood of Event (%) Global Impact (1-5) Global Business Impact Score (1-100)
1 Asia-Pacific The coronavirus epidemic is not contained rapidly, leading to a paralysis of China’s economy well into Q2, with stark consequences for China’s customers and suppliers around the world as raw material prices crash and manufactured items become scarcer. 75 4 60
2 North America US-led trade wars continue amid a continuation of protective trade policies following President Trump's impeachment acquittal, negatively impacting global supply chains. 60 3 36
=3 Pan-regional Global equity valuations collapse in the context of the coronavirus outbreak and unexpected national and epidemiological security barriers to supply chains, trade and investment. Venture capital and commercial real estate markets in prime business centres go into shock. 50 3 30
=3 North America Impeachment acquittal of President Trump produces renewed division among the dominant political parties making domestic and global policy cohesion more difficult to accomplish. 75 2 30
=3 Western and Central Europe The further decline of the automotive sector causes problems for Europe’s industrial sector, with knock-on effects for global supply chains. 75 2 30
6 Western and Central Europe Election victories of far-right parties in Italy and France lead to more complicated policy making on EU level, severely undermining the operating environment for European businesses. 35 4 28
=7 Pan-regional Technological threats, predominantly driven by artificial intelligence, lead to economic damage and geopolitical risks. Threats of cyber-attacks, data theft, fraudulent activities by state and non-state actors, and the risks of outages of information and networks rise continuously, thereby undermining the global business environment. 45 3 27
=7 North America Peak rates in the US have been reached for the current expansion, leading to a turn in the credit cycle and eventually the US business cycle; in turn, impacting global prospects. 45 3 27
=9 Pan-regional The coronavirus becomes a global pandemic, affecting urbanised areas worldwide in emerging-market and advanced countries alike, with unforeseen consequences for mortality, politics and the global economy. 25 5 25
=9 Pan-regional US-Iranian tensions lead to actual military conflict between the countries, prompting the closure of the Persian Gulf to oil tankers and pushing oil prices above USD150 per barrel. 25 5 25