Global risk predictions - part two

Global risk predictions - part two | Insurance Business

Global risk predictions - part two

The following is the second part of our three-part global risk predictions series shining the spotlight on emerging markets. In part one we looked at the Asia-Pacific region. Now we examine India with two leading experts from the Institute of Risk Management.

Sonjai Kumar, CMIRM, IRM Global Ambassador for India
The year 2019 is important in the course of India, and its future politico-socio-economic development will depend on the results of the general election. Many of the factors of economic risks such as demands for goods and services, government policies (fiscal and monetary), the real estate sector, exchange rate, inflation etc. will depend on who takes the reins of the country.

In the next couple of months, there could be pro-people measures which may consume excess cash sitting with the central bank. If this is the case, the central bank may have to take tough measures post-election. The funding of election expenditure may be recovered post-election through price rises leading to an increase in inflation in the late half of 2019. This could mean that interest rates may remain at their current level or even at a higher level during the second half of 2019.

Environmental risks continue to be high due to global warming and the limited steps taken by different governments. Excess of rain/flooding continue to be the consequence of an adverse environment. Cyber risk continues to make headlines during 2019; more investment towards digitalization will further increase risk due to a lack of full understanding of the digital world. The infancy of risk culture in India may prove to be expensive for some businesses.

The protectionist approach by the developed market may throw challenges to the Indian workforce; the country, therefore, should focus on the manufacturing side rather than service side.

Abhishek Paul CMIRM, Global Ambassador for India

Metro-Political Risk:
The fact that there are comparatively high paying jobs in the metro cities in India attracts a lot of people - and the cycle is fulfilled since multi-national corporates feel the best talents are available in the metros owing to good education and good infrastructure. As such, they set up their base in the city with an objective to operate at lower costs with the best of academically trained workforce.

In recent times, India has witnessed a spike in incidents of groups of individuals, led by impactful leaders in their own right, leading the city to a standstill. This has come in many shapes and forms - be it via release of films; riot like situations due to demand for reservations; spiritual leaders turning rogue; political speeches and actions aimed towards religious divide; even hearse van processions of famous political and film personalities bringing the cities to a standstill; added to the inability of the governments and authorities to curtail rogue elements of society; to name just a few - along with more prevalent issues like growing traffic, population, pollution and intolerance.

The incidents and the severity thereof are increasing and, for the majority of corporates, the solution during these times is to implement BCP or work remotely which leads to the thought - what would stop the jobs from going away from the metro cities and into the second tier cities like Pune, Ahmedabad, Chandigarh and many others which probably have a better future creating infrastructure to boast of, and could also be part of the vision for the smart cities of the future in India?

Multi-national corporations would be compelled to move to other cities if they feel that forced BCP situations are on the rise – they are not expected to decline. If, in the next five years, the metro cities reach their saturation point and second tier cities come to the rescue, it could lead to a crisis in the metro cities for the middle and upper class who are probably banking on real estate and other similar fixed assets they have been able to create in these cities. When the jobs go away - and along with it the disposable income to buy luxury items - metro cities in India as we know them will never be the same. In fact, there could be a potential subprime situation considering the amount of money invested in residential and commercial properties, a concept which was fundamentally standing on the pillars of employment in high paying jobs leading to high per capita income.