Q: What is the most pressing risk to global foreign investment?

A: The US-China trade dispute, which is taking longer to resolve than anticipated. However, our analysts in Washington and Beijing say that neither China nor the US is any hurry to resolve this dispute. From the US perspective, the longer it waits the more it thinks that China will come under economic pressure. China is in no hurry because the US is asking it to make fundamental changes to its economy that are not in China’s best interest, from the Chinese perspective. 

There’s a new geopolitical order under construction right now, set in the rivalry between the US and China in technology. This includes artificial intelligence, quantum computing, satellite technology, biotechnology. We’ve seen statistics that show the US military budget is bigger than the next five military biggest budgets combined. China has more gene-sequencing machines than the next five countries combined, which tells you a little bit about where the emphasis on technology lies. There is a growing risk that businesses may be forced into one camp or another. 

Q: What’s the second top risk?

A: We’re looking closely at how data is regulated around the world, and we see three spheres of influence. In China, one approach involving a very heavy role assigned to the government. In the EU, a very significant role around protection and privacy. Broadly speaking, in the US we see an attitude towards data that sees it as an asset, something that can be bought and sold. The risk to businesses in all of this, is how to comply and do business across these three attitudes towards data, and the compliance risk and regulatory risk. 

The third top global risk is the US political deadlock, with the Republicans and the Democrats confronting each other in Congress and the House of Representatives. There's a tug of war now between the Capitol and the White House in terms of conduct of US foreign policy, due to the lack of trust between the two branches of government in terms of foreign policy, particularly when it comes to sanctions. 

Q: How about the fourth and fifth top risks? 

A: Climate change is next. That is because we think that the economic damage potential assigned to extreme weather and climate change exceeds that of the economic damage caused perhaps by terrorism, or caused even more than that caused by the US-China trade dispute, and we wonder very seriously whether how many companies or investors have a consolidated view of their exposure to climate change and extreme weather risk. Countries where the population is growing very rapidly and water resources are scarce are at a high risk.

The last top risk is the [growth of frictional borders]. Companies that built almost cloud-like supranational structures where you’ve got a headquarters in one country, listing in [another] country, and a CEO in another country – how will these business models respond to the re-emergence of borders? Brexit is the best example of this.