In a challenging and geopolitically eventful year, 69% of companies around the world reported supply chain disruptions due to political events, according to a new report from WTW.

“How do leading companies manage political risk today?” The report, now in its seventh annual edition, reflects a shift from warning to preparedness. The survey found that 96% of companies have invested in new political risk management capabilities. These investments include enhancing corporate operations and creating cross-functional teams.

State-sponsored supply chain disruptions, caused in part by unrest in the Red Sea, and “gray zone aggression” — actions intended to weaken a country without open warfare — are among the top trade concerns for 2024. For the first time, gray zone aggression has entered the top 10 risks.

Additional findings of the report include:

• 47% of companies were exposed to political risk losses exceeding $50 million.
• The conflict in Gaza had a smaller financial impact than the conflict in Ukraine, with 4% reporting a high financial impact from Gaza compared to 20% from Ukraine.
• Trends towards geostrategic competition and populism are expected to strengthen.
• As the United States heads into the election, 64% of respondents expressed concern about political risks in North America, matching concern in Asia.

Leading business risks

Here are the top 10 risks for 2024.

• Ukraine complications and escalation
• Election year
• US-China rivalry
• Uncertain climate policy
• Chinese mismanagement of risks
• Escalation in the Middle East
• The next big conflict
• Slowing growth of the local market
• Institutional decay
• Gray area work

“After two challenging years, companies appear to have accepted that large political risk losses are the new normal and are building risk management capabilities,” said Sam Wilkin, director of political risk analytics at WTW. He highlighted concerns about attacks on infrastructure, such as sabotage of pipelines and cables, and attacks on assets in international waters, facilitated by the spread of drone technology.

One oil industry executive noted that although political risks are recognised, they do not deter operations and are managed within the broader risk management framework. Meanwhile, a European energy executive mentioned facing hybrid or gray zone threats due to the Ukrainian war, including sabotage and cyberattacks such as the Nord Stream attacks.

The conflict in Ukraine remains the biggest risk, followed by concerns about the elections. With more citizens voting in 2024 than ever before in the next few decades, managing political uncertainty and potential trade fallout poses a major challenge. Speakers expressed concerns about trade wars, rising protectionism, and populism.

The survey and interviews were conducted in March and April 2024 by Oxford Analytica, with responses from 50 companies around the world, 64% of which have revenues exceeding $1 billion.

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