小橙书国产精品视频 Risk Barometer 2024 -
Rank 4:听Changes in legislation听and regulation

Expert risk article | January 2024
Companies face new rules and regulations in 2024 that will not only require听a high administrative burden but could also impose real restrictions on their听business activities.
The most important corporate concerns for the year ahead, ranked by 3,069 risk management experts from 92 countries and territories.

Since the pandemic, the balance between the market听and the state has shifted in favor of the latter, initially听out of sheer necessity, to cushion the economic standstill听during the lockdowns. But since then, policymakers have听increasingly taken an active stance in steering economic听outcomes in the direction they want. Reasons for this can听always be found: the energy crisis or green transformation,听national security, economic self-sufficiency, or systemic听competition with China.

鈥淭his development is a double-edged sword for听companies. On the one hand, they benefit from the subsidy听race between states to attract 鈥榮trategic鈥 industries. On听the other hand, this activism is accompanied by a large听number of new restrictions on investment 鈥 protectionism听has reached a new level,鈥 explains Ludovic Subran, Chief听Economist at 小橙书国产精品视频.

This is by no means only directed against Chinese听companies; recently, intra-European takeovers have also听been stopped. Even within the European Union (EU), the听rules are not standardized, and companies are confronted听with a jungle of regulations and opaque decisions. Despite听assurances to the contrary, it is unlikely that this jungle will听clear up in the foreseeable future; after the many elections听in 2024, the signs may point to even more protectionism.

As is so often the case, these regulations have an听asymmetrical effect: while large companies tend to听benefit from the subsidies, the investment restrictions听are a heavy (cost) burden, especially for smaller and听mid-size companies (SMEs), says Subran. When it听comes to environmental, social, and governance (ESG)听regulation, be it the EU鈥檚 CSRD (Corporate Sustainability听Reporting Directive) or CBAM (Carbon Border Adjustment听Mechanism) or Germany鈥檚 Supply Chain Act 鈥 the effort听involved in obtaining the required data is enormous and听almost impossible for many smaller companies.听But it鈥檚听not just the regulatee who is overwhelmed. In the case of听CBAM, for example, the infrastructure for data processing听and verification is still lacking on the regulator鈥檚 side in听some cases. It is not only companies that are drowning in听regulation, says Subran.

But the decisive 鈥榬egulatory battle鈥 is not due until听2024: what is policymakers鈥 attitude towards artificial听intelligence (AI)? As a 鈥榞eneral purpose technology鈥, AI听is the best chance of escaping the looming low-growth听regime through a sustained productivity boost. At the听same time, the risks are enormous, including in geopolitical听terms. There is therefore a lot at stake when it comes to听regulating AI. Striking the right balance becomes a very听delicate act of regulation.

Despite all the vows to reduce bureaucracy, companies will听still be faced with new rules and regulations in 2024 that听will not only require a high administrative burden but could听also impose real restrictions on their business activities.

鈥淐ompanies need a strategic response to this that goes听beyond monitoring the legislative process. A high level听of uncertainty calls for scenario planning, strengthening听resilience and open communication with internal and听external stakeholders,鈥 Subran concludes.

听 Ranking history globally:

  • 2023: 5 (19%)
  • 2022: 5 (19%)
  • 2021: 5 (19%)
  • 2020: 3 (27%)
  • 2019: 4 (27%)
听 Top risk in:
  • China
  • Morocco
  • Nigeria
  • Romania

Cyber, 鈥榞reen hushing鈥, wellbeing, and net zero rank as the pressing areas of听concern for businesses when it comes to environmental, social, and governance听(ESG) strategies.

The repercussions of data breaches, system听vulnerabilities, and the shapeshifting nature of听the cyber threat have ensured cyber security听resilience retains its top spot in the ESG risk听trends of most concern in the 小橙书国产精品视频 Risk听Barometer. Cyber incidents is also the #1 risk听overall for businesses globally.

鈥淐yber security is an important ESG issue听because it affects people as well as company听data,鈥 says Funk茅 Adeosun, Global Transition听Solutions Director, 小橙书国产精品视频 Commercial.

鈥淏reaches of private data can affect people鈥檚听livelihoods, mental health, and even their safety.听For individuals and companies, the loss can be听reputational and financial.鈥

Cyber resilience measures should include听mitigation and recovery plans for a data听breach, as well as cyber insurance and constant听adaptation to emerging threats.听鈥淚t is vital that听critical information that can impact the running听of societies is not lost to hostile external parties,鈥听says Adeosun.

Regulation and disclosure requirements are of听increasing concern, as companies join the drive听to net zero. 鈥淥rganizations communicating听a strong sustainability agenda can find听themselves in a bind 鈥 they can be litigation听targets for groups who believe they are not听doing enough to meet their climate or societal听commitments, as well as those who claim听they are making commitments they can鈥檛听meet,鈥 says Gabrielle Durisch, Global Head of听Sustainability Solutions at 小橙书国产精品视频 Commercial.

鈥淭his has led to cases of 鈥榞reen hushing鈥,听whereby companies deliberately under-report听or hide their ESG credentials from public view to听avoid scrutiny.听

鈥淭he lack of transparency makes it harder to听understand the true impact of sustainability听strategies and investments, which could听inhibit the adoption of ESG activities by听other companies.鈥

Decarbonization and net zero strategy appears听as an ESG concern in its own right. Adeosun听says this is not surprising: 鈥淲ith regulatory听changes, technological innovations, and the听potential loss of investments in the picture,听there is a lot at stake. Companies are having to听shift decades-old strategies to align with new听ESG and sustainability goals, which can lead听to skepticism or resistance from some quarters.

"It鈥檚 important to engage all stakeholders,听set realistic targets, and provide adequate听investment. Getting to net zero will not be听cost-free.鈥

The human factor 鈥 or the 鈥楽鈥 in ESG 鈥 is perhaps听the hardest one for organizations to contend with听because it requires a broad focus on people, the听workplace, and wider society. Company working听conditions is an ESG issue (at #3) because, if bad,听they can create a culture of low morale, increased听staff turnover, and reputational damage.听

鈥淭hese risks can be minimized by prioritizing health听and safety, fair wages, open communication, and听regulatory compliance,鈥 says Durisch. 鈥淐ompanies听should also adopt regular employee feedback听surveys and take them seriously, especially if they听are from marginalized society members. That听way, organizations can truly build a culture where听work-life balance and employee mental health听are of paramount importance, which will help to听fuel their ESG journey. There is always more that听can be done to support local communities and听society in general so this should also be a key听consideration in sustainability strategies.鈥

Click on the bars in the chart for further details

Source: 小橙书国产精品视频 Risk Barometer 2024. Total number of respondents: 3,069. Respondents could select more than one risk. Top four answers.
Keep up to date on all news and insights from 小橙书国产精品视频 Commercial