Terrorism, Syria, cyber crime and the EU key drivers of world’s 2016 economic change

Tell us about yourself, your background and how you ended up in Control Risks. I have been with Control Risks for 12 years and have been fortunate enough to live and work throughout Africa and the Middle East during this time. I moved full time to Kenya in April 2015 and am thoroughly enjoying the culture and warm Kenyan welcome – although this is not always the case whilst playing rugby for the Nondies on a Saturday! Since my early days with the company I have been fortunate enough to be involved in a number of large-scale projects where the solutions delivered have had a real positive impact. This has ranged from providing crisis management assistance to clients impacted by the In Amenas attacks in Algeria to providing business intelligence to a company looking to enter Kenya. Give us a brief history about Control Risks. Control Risks was founded in 1975 and since then our main aim has been to support clients to be successful in some of the world’s most challenging markets. We have worked in Africa for over 30 years, but have a global footprint, which allows us to always pull together the best resources and experience from all over the world to best serve the client’s needs. Over the years, these needs have changed alongside the international regulations. While at the beginning companies – international investors as well as national companies – might have been more concerned about the security situation in specific countries, the much stronger enforcement of international compliance regulations is now very high on the agenda as well. Control Risks has developed in line with these needs, expanding its services to all major business risks a company can face. Our latest addition, just last year, was the assessment of economic risks together with our joint venture partner Oxford Economics. Why would an organization be keen to manage political, integrity and security risks? East African countries are currently high on the investment agenda globally with the discovery of oil reserves. The increasing investment in renewable energy and the development of regional high-technology hubs attract the interest of national and international companies. With all these investments comes the need for further improvement of the infrastructure, which again offers great opportunities for the construction industry. The visit of US President Barack Obama to Kenya, raised hopes for further support for growth from the international community. Despite improvements in the political and business environments, companies and organisations continue to face a myriad of risks. Political interference, arbitrary interpretation of laws, corruption and bureaucracy to political volatility, instability, violent crime or terrorism, and community- or labour-related issues are just some of the challenges national and international investors are facing. These investment and business opportunities will largely succeed or fail depending on how investors identify and manage the risks facing their business. You will present your annual flagship publication “RiskMap” to the Kenyan audience in February. What is it and what can businesses gain from it? RiskMap is our annual forecast of the global business risks in the upcoming year. We have the largest in-house team of country analysts in the sector who once a year predict with their in-depth knowledge what private and public organisations need to be aware of in the next year. We produce global analysis as well as specific regional pieces that give insight for international organisations. This year for example, one part of the analysis is a video on the incredible positive development that Ethiopia is going through at the moment and what this means for international and regional investors. But our team, for example, also predicts the major global cyber risks for 2016. Readers of RiskMap may get specific advice on what to do or not, but RiskMap gives a good insight on developments organisations need to be aware of. RiskMap also provides a platform for Kenyan business leaders to interact with our analysts. From your RiskMap 2016, what are the key drivers of economic change from a global perspective? In RiskMap 2016 we have identified 5 top business risks globally: Terrorism and IS – with the attacks in Beirut, Paris and Ankara, IS showed it is capable of conducting high impact attacks not only close to its comfort zone, but also far away from its base in Syria. Although we believe that IS’s primary goal remains consolidating its position in Syria and North-Western Iraq and establishing its version of a caliphate in the Middle East, we remain concerned that IS will radicalise sympathisers near and far including East Africa. Globally, the war in Syria will have a huge impact as well. We need to monitor how Russia’s involvement will continue to shape the course of the dispute, particularly now that Russia is at odds with Turkey, one of the key players in the Syria conflict. We are monitoring the activities of Saudi Arabia and Iran in connection with their proxy war for predominance in the Middle East. The third global top risk is cyber – Hardware compromise, criminal attacks and nation-state espionage operations are our top three cyber risks for next year. We believe that a broader range of actors will threaten industrial control systems. Going forward, it’s not just our customer databases and credit card information at risk; it’s the very functioning of industry that’s in the crosshairs. The future of the European Union is our fourth global risk. The EU has absorbed four almost existential blows in recent times: the Greek debt crisis, Russia’s annexation of Crimea and intervention in Eastern Ukraine and most recently, the influx of refugees from conflict zones around the EU’s southern and eastern borders. The European Union is the world’s largest economic and political bloc, and it is coming apart at the seams, politically and economically. Our final of the top 5 global risk is one that arises when the outlook seems bleak almost everywhere you look. From the business perspective, we face the risk that positive developments get overlooked and that we lose perspective. The business community – as well as the governments we work with – get side-tracked by legitimate and urgent emergencies. The victim in the long term is the risk that we overlook progress. We see a lot of positive developments also in East Africa. We are, broadly speaking, safer, healthier and wealthier as a planet than we have ever been and this is something we should not forget. What do you project for East Africa in 2016? 2016 is an interesting year for East Africa with countries like the US looking to spend $50 billion in the region.  With a huge percentage of these funds going into infrastructure, the region can expect growth. Certain issues will be pertinent to the East African business scene top on the list being Economic pressure: The Kenyan government for example has to contend with a large budget deficit, increasing borrowing costs, a weak shilling and the need to part-finance the upcoming elections in the next budget cycle. As a result, businesses are likely to see a growing tax burden (some of it is already clear like the introduction of VAT on petroleum products) and additional regulations (e.g. strengthening of labour laws). Terrorism will also be a major consideration with al-Qaeda and the Islamic State competing for al-Shabab’s loyalty and the security forces struggling to respond to the group’s adaptation and expansion into the region. Terrorism is a risk that is not going to go away. Security concerns aside the biggest risk to business stems from the negative perception that will keep foreign investors concerned and potentially deter them from investing in Kenya or partnering with Kenyan companies. Another major consideration is the Anti-graft war with elections coming up in 2017 and the opposition focusing their efforts on corruption the government will try and sponsor high-profile anti-graft campaigns. While unlikely to produce a real change in the culture and prevalence of corruption, the politicization of the anti-graft war means that enforcement is likely to be uneven and at times politically motivated, increasing the risk of unfair treatment. Election dynamics will also come into play, having fully understood the implications of the devolved system of government (especially sharing of revenues and the importance of the position of governor) the upcoming elections will be as much about the local level as about who wins the presidency. As a result, we are likely to see most of the usual election risks (politicians recruiting militias, increase in ethnic violence, pressure on companies to provide more local benefits/jobs/etc) replicated across a number of Counties, exposing companies to a much more complex environment than before. Finally, the sole focus on Kenya will shift, investors have for a long time focused on Kenya for trade in the region, however, there is a shift as #WhatWouldMagufuliDo and the GTPII are not just Twitter trends but developments that are actively changing the region, challenging Kenya’s position as the dominant business hub in East Africa. Companies looking beyond Kenya can find real opportunity in Tanzania and Ethiopia).

Sign Up