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5 biggest business risks in 2019

5 biggest business risks in 2019

Risk

There are five substantial risks that threaten businesses and economies worldwide in 2019, a respected research house has said, with some industries more susceptible than others.

The Economist Intelligence Unit (The EIU), part of the international business publication The Economist, suggested that there are five key risks for the global economy and identified six distinct industries with the greatest exposure to these risks.

It said that the global economy will be most vulnerable to a US–China trade war, a global economic slowdown, fallout resulting from Brexit, sanctions on Iran and cybersecurity threats.

The industries most susceptible to such risks were identified as the automotive, retail and consumer goods, energy, financial services, healthcare and pharmaceuticals, and telecommunications sectors.

Trade war rhetoric ramping up

“With the US already poised to impose more tariffs on the remaining trade between the two, there is a risk that this will escalate into a full-blown global trade war,” The EIU said.

“That would disrupt supply chains, particularly for the automotive and consumer goods industries. It could also undermine business and consumer confidence, dampening investment and private consumption.”

It also noted that tensions between the two countries are raising technology risks, as “a tussle for technological dominance is at the core of the US–China trade dispute”.

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Brexit — change no matter what happens

The UK’s withdrawal from the European Union, colloquially referred to as Brexit, is due to take place in March 2019. The final details of how its relationship with the EU will look are yet to be finalised.

According to The EIU, healthcare, automotive and financial services businesses are likely to feel impacts “regardless of any deal that is struck”.

It is also likely to cause turbulence on foreign exchange markets.

Iranian sanctions

What do sanctions in Iran have to do with businesses here in Australia? The main risk, according to The EIU, is a spike in petrol prices.

“The US’s decision to backtrack from the international Joint Comprehensive Plan of Action could push up global oil prices in 2019,” it said.

That would have a significant flow-on effect to operational costs and could even drive inflation higher.

Cyber security

As we have seen in recent years, such as with the WannaCry ransomware attack in 2017, cyber security threats have ramped up from small, local attacks to ones that can wreak havoc on a global scale.

This will continue to pose significant business risks, The EIU said, particularly given that regulators are “struggling to ensure safe connectivity”.

(A cyber security story previously revealed the most common things cyber criminals look for in their next victims, with SMEs a prime target for attack.)

How do these risks compare with 2018?

One of the biggest challenges that had been forecast for 2018, at least in Australia, never materialised.

In December 2017, NAB revealed expectations that the Reserve Bank would be hiking interest rates from their record low of 1.5 per cent, with rates to increase in August and again in November.

However, the central bank has so far continued its record-breaking streak of keeping interest rates steady, and is likely to do so well into 2019.

What was correctly forecast was a slowdown in Australian house prices.

CoreLogic had forecast dwelling prices to continue the slide they began in most capital cities in late 2017.

But it may not have judged just how far that downturn would go.

As of the week ending 25 November, the data firm said that Sydney house prices had led the downward march, falling by 7.9 per cent over 12 months. Prices in Melbourne were also down by 5.6 per cent and Perth slumped by 4 per cent.

That took the overall change in house prices for Australia’s five largest cities to a 5.5 per cent drop over the year.

5 biggest business risks in 2019
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