Economic downturn, inflation, and energy supply shortages have emerged as the primary risks to doing business in the Asia Pacific (APAC) region over the next two years, according to findings from the annual Global Risk Report Executive Opinion Survey.
The survey polled over 11,000 executives across more than 110 countries between April and August 2023 and asked them what they believed were the five main risks that would pose a major threat to their respective countries over the next two years.
Economic concerns top of mind for APAC executives
The survey revealed that an economic downturn was identified as the top risk, mirroring global sentiments, and was consistent across all APAC sub-regions, including Central Asia, Eastern Asia, Southeastern Asia, Oceania, and Southern Asia. Inflation and energy supply shortage, which also featured in the top five global risks also featured prominently among the top five perceived risks across all APAC sub-regions, underscoring the universal nature of these concerns. Labour and talent shortage was another risk that featured across most APAC regions.
In Eastern Asia, while an economic downturn, labour and/or talent shortage, and energy supply shortage remained prevalent concerns, the region uniquely ranked geoeconomic confrontation, such as sanctions, tariffs and investment screening, within its top five risks, the only region around the world to do so. This differentiation might stem from the lingering influence of US-China trade tensions despite China’s absence from this year’s poll. Interestingly, unemployment stood out as a remarkably low perceived risk in Eastern Asia compared to global standings and the other APAC sub-regions.
Commenting on the findings, Siddhartha Medappa, Regional Head of Risk, APAC for Zurich Insurance Group, said: “Within the diverse tapestry of the Asia Pacific region, the survey’s revelations shed light on the varied risk landscapes. While economic downturn, inflation, energy supply shortages and talent shortages stand as pervasive concerns, regional nuances unveil distinct perspectives. From Eastern Asia’s worries around geoeconomic confrontation to Southeastern Asia’s concerns on infectious diseases and extreme weather, these findings emphasize the intricacies of risk perception across APAC. Navigating these multifaceted risk profiles demands a nuanced approach, one that acknowledges and addresses these diverse challenges for sustained resilience.”
Mr. Medappa continued: “While we identify and rate risks on a standalone basis, it is important that we build our overall risk assessment taking into consideration the interconnectedness of the top risks and the varying degrees of impact it could have across the APAC region and globally.”
Worries around infectious diseases and extreme weather events emerge high in Southeastern Asia Despite the reducing threat of COVID-19, infectious diseases, including coronavirus, influenza, tuberculosis and malaria, still emerged as a top concern in Southeastern Asia, reflecting high population densities in major urban centres and the potential impact of containment measures on business operations and growth in developing markets.
Additionally, labour and/or talent shortages remained a consistently aligned risk across markets in this region, indicating challenges associated with sourcing skilled professionals as businesses look to expand their head count and traditional sectors continue to digitalise.
Extreme weather events and household debt take centre stage in Oceania
The Oceania region exhibited distinctive risk priorities with extreme weather events (floods, storms, etc.) and household debt featuring among the top five concerns, setting it apart from other APAC sub-regions. Extreme weather events’ placement in the top five perceived risks of executives in Oceania likely stems from increased occurrences of secondary perils such as floods and wildfires in recent years due to extreme weather patterns.
The notable inclusion of household debt in the top five perceived risks, significantly higher than its global rank, underscores financial vulnerabilities arising from maturing mortgage debts and subsequent refinancing at higher interest rates this year.
Southern Asia’s focus on inequality
In Southern Asia, wealth and income inequality was identified as a top-five risk, a concern not ranked as highly by other APAC sub-regions. This emphasis was primarily observed in Bangladesh, India, and Nepal, signifying a regional sensitivity to socioeconomic disparities.
The possibility of an economic downturn, which would have a pronounced impact on the region’s growth prospects, remains a key concern in Southern Asia. This is in line with the World Bank’s report earlier this year which highlighted Southern Asia’s weakened growth outlook due to tightening financial conditions and limited fiscal space, accentuating the risks prevalent in most countries in this region.
Mr. Medappa also highlighted: “Despite not being rated as a top five risk the ongoing threat of cyberattacks on companies and critical infrastructure as well as the potential for supply chain disruption remain as key risks in the region as well.”
The Executive Opinion Survey is conducted by the World Economic Forum’s Centre for the New Economy and Society. Marsh McLennan and Zurich Insurance Group are partners of the Centre and the Global Risks Report series.
