The following is the second part of a series written in association with the Institute of Risk Management. Follow this link for Part One.
The below is written by Alexander Larsen, CFIRM, president of Baldwin Global Risk Services Ltd and IRM trainer and chair of the Energy Special Interest Group. The views expressed within the article are not reflective of the company nor of Corporate Risk and Insurance.
The energy sector will be interesting to watch in 2019. Oil companies can expect to have an easier year despite potential oversupply of oil. Restructures are completed, profits are back on track and new projects are being slowly re-introduced. Perhaps the most interesting part of the energy sector to watch out for is renewables.
Renewable energy could have a big year in 2019 with oil companies and countries heavily reliant on oil, looking to diversify into solar, wind and wave power. Additionally, with cities across the globe attempting to meet climate change targets we can expect further investment. We can also expect to see a growth in new technology within the renewable energy field too, including areas such as energy storage, microgrids, Artificial Intelligence (AI) and other technology that will either decrease prices significantly or improve efficiency.
While these are all positive developments there are a number of major risks to meeting our future climate change goals which could play out in 2019. Having watched recent developments in France, and Macron’s U-turn on climate taxes, along with grumblings across Europe, there is a growing movement to challenge government, which could lead to climate change taking a back seat to more pressing and short term country issues.
Tech industry – a giant leap or a fall from height?
A giant year ahead for the major tech companies which many have considered as being in a bubble with the major players being overpriced. Apple, Amazon, Microsoft, Intel, IBM, Facebook and Alphabet (Google) may be beginning to show signs that they have hit a ceiling with various scandals, new regulations, stagnant product lines and trade tariffs impacting their share prices significantly over the past quarter.
2019 will be the year where tech companies will either fall short or thrive. Innovation, going hand-in-hand with risk management, will be key to continue the tech dominance in the stock market and continued increases in share prices.
Companies such as Nvidia have relied heavily on graphics card sales on the back of a strong 2018 cryptocurrency mining trend which has since faded away and new sources of profit, such as artificial intelligence, are now being focused on. Meanwhile many companies, such as IBM, are focused heavily on rolling out their blockchain technology while others, such as Microsoft, are banking on challenging the likes of Nvidia with their own artificial intelligence and Virtual Reality offerings. And then of course we have robotics and Apple’s self-driving cars that Elon Musk has suggested will be Tesla’s major rival over the coming years.
The fact that many of the companies in the tech industry need these new technologies to go mainstream in order to maintain performance indicates that we could be closer to the future than we realise. If it doesn’t happen however, then the tech industry risks stagnation, loss of confidence and further share price losses in 2019.
Cryptocurrency & Blockchain
Last year I predicted that the crypto bubble would come crashing down. Only a few days later prices started falling. A few months later and prices were down 50-60%. Now, looking back 12 months, the prices have fallen up to 98% in some cases. Whilst the bubble may have burst (it may still have life in it yet. One more pump and dump cycle), 2019 will see significant progress in blockchain technology as well as cryptocurrency.
The crash of crypto currencies can be linked to a number of reasons such as:
- 70-80% of all ICO’s during 2017 and 2018 being exposed as scams with all ICO’s being overvalued and many of the non-scam ICO’s never finalising a product or unable to meet expectations.
- Blockchain technology being over hyped with many claiming it would change the world.
- A lack of regulation.
- A number of high-profile hacking incidents.
- Exchanges behaving in a dubious and illegal manner.
2019 will almost certainly see an end to ICO scams. Not only is regulation slowly being put in place by authorities, but investors are growing wiser. ICOs will need to value their business more realistically, meet regulation and safeguards and have a more solid business plan with a product that is both achievable and realistic.
Regulation also ensures that hacking incidents will be fewer and have less of an impact in 2019 while also adding legitimacy to the exchanges which should see an increase in sensible investors.
Blockchain technology itself should also see more mainstream acceptance in 2019 too. Companies such as IBM are already implementing the technology in the shipping supply-chain industry and such initiatives will help bring it to the mainstream. It is important to note that this will also help to kill the hype that many of the crypto currency companies have been pushing. Many investors of 2018, who have lost a lot of money in the crash had bought into a dream thought up by ICOs of a technology that would change the world.
Seeing real use-cases for blockchain technology in rather unexciting areas (supply chain, etc) and within traditional industries (not futuristic companies as many foresaw) should bring people to realise, that while it’s a great and exciting technology, it’s also a rather boring, straightforward technology and unlikely to change the world in the way they perhaps thought.