Growth economies are ripe for investment and development, but a new report from Maplecroft reminds us that these opportunities often come hand-in-hand with significant business challenges.
Maplecroft's Global Risks Atlas 2011, focuses on seven key global risk' areas, which are defined as risks that have the ability to affect multiple regions and industry sectors, but are outside the control of an individual government or business. The list of seven key global risk areas includes:
macroeconomic risk
security risk
governance risk and illicit economies
resource security
climate change
pandemics
societal resilience, including human rights
The four countries that top the ranking Somalia (1), Sudan (2), Afghanistan (3) and DR Congo(4) are all rated extreme risk.' Each of these countries is characterized by weak governance, internal conflicts and regional instability.
However, as Maplecroft points out, business leaders may want pay particular attention to the several strategically important growth economies that are also rated as high risk.' Nigeria (12), India (15), the Philippines (17), Russia (21) and Indonesia (32) are among the countries driving most of the positive momentum behind the world economy, but Maplecroft rates all of them as high risk.'
Each of these countries face unique challenges, but, with the Philippines (8), Russia (10) and India (11) rated extreme risk' and Nigeria (12) and Indonesia (28) considered high risk' in the security risk' category, politically motivated violence and terrorism must now be a primary concern for investors in these territories.
Not all growth economies are as risky. South Korea (144) is considered a growth economy, but it has a stable government and macroeconomic situation, as well as a population with excellent access to health and knowledge. As a result, even though South Korea is rated high risk' for climate change vulnerability (based on threat of flooding and cyclones), Maplecroft assigned it a low risk' rating in the overall ranking, strengthened by its overall resilience.
"The key to understanding and managing global risks is to view them as interdependent," Maplecroft analyst, Siobhan Tuohy, said. "For instance, conflict and regime stability risks are increasingly triggered by issues relating to poverty, unemployment and food security, which is seen throughout the Middle East at the moment. The Global Risks Atlas 2011 enables organizations to understand relationships between different global risks and to identify potential flashpoints."
