Insight Report Regional Risks for Doing Business 2019 In partnership with Marsh households whose income is especially sensitive to price fluctuations; and workers whose jobs could be threatened by a weak labour market. A global public finance crisis is deeply related to four of the other top 10 risks about which chief cutive officers are most worried “unemployment or underemployment”, “energy price shock”, “failure of national governance” and “profound social instability”. Global unemployment decreased to just below 5 in 2018, its lowest level in 10 years. 2Nevertheless, a global recession at a time of narrow fiscal margins and rapid technological change would make it much more difficult for both business and governments to continue to create new and well-paid job opportunities. A potential consequence of such a scenario, “unemployment or underemployment”, ranked first by the greatest number of economies 30 out of 133 and third globally this year. It was also the top risk in sub-Saharan Africa, the world’s youngest region. “Energy price shock” is another risk that deeply concerns the private sector, although one that can materialize in the responses for different reasons. In the Middle East and North Africa, this risk ranked first and “fiscal crises” second. Oil and gas remain primary sources of public revenue in this region, so a sharp fall in energy prices could require governments to make delicate spending adjustments, and more so when energy prices are heavily subsidized. Alternatively, a shock in which energy prices spike rather than plummet would mean increased production costs for businesses and heftier burdens for households 65 of the world’s electricity is still produced from oil, gas and coal. 3A third cause for concern, demonstrated by recent attacks on critical oil infrastructure in the region, is that “energy price shocks” are not only linked to market forces, but also to geopolitical tensions that endanger the supply of this basic commodity. Businesses are likely experiencing heightened uncertainty around energy markets because of this risk. The timing of the survey, however – January to April – coincided with an increase in international oil prices from 45 to 66 per barrel. 4An economic slowdown would likely exacerbate deeply felt social dissatisfaction. This risk also concerns business cutives, who identified “failure of national governance” and “profound social instability” as the fifth and sixth global risks for doing business. If public finance crises force a shrinkage of the welfare state, even more social disruption could be created. “Failure of national governance” was the number one risk in Latin America and the Caribbean, while “profound social instability” topped the list in Eurasia. Yet, as we analyse these two regions, economics is not the only reason why political and social risks rank so high. In Latin America and the Caribbean, for example, the risk of governance failure is also motivated by anxiety around corruption and physical insecurity. In Eurasia, geopolitical tensions and electoral disputes are driving a sense of social instability. Cyberattacks evolve and diversify We track five risk categories throughout our cutive Opinion Sources * World Bank † OECD ‡ IMF10 Regional Risks for Doing Business Survey and Global Risks Perception Survey economic, environmental, geopolitical, societal and technological. Technological risks is the only category ranked in the five most pressing concerns by both sets of respondents. “Cyberattacks” and “data fraud or theft” are the second and seventh global risks most likely to increase within the next 10 years in the eyes of the world’s private sector, and were perceived as the fourth and fifth biggest risks by the broader multistakeholder network surveyed for the Global Risks Report 2019. The fact that cyberthreats worry the business community as much as they do academia, civil society, governments and other thought leaders shows just how disruptive this risk is to all aspects of life. As economies and societies continue to digitize, cyberattacks are both more lucrative for attackers and more dangerous for victims. According to this year’s Annual Cost of Cybercrime Study, conducted by the Ponemon Institute in conjunction with Accenture, cybercrimes cost companies on average 12 more between 2017 and 2018. 5At the same time, Symantec warns in its Internet Security Threat Report how new s of cyberthreats are emerging – such as jacking, a malicious code that steals purchase s from e-commerce websites – as companies and people continue to remain exposed to more ubiquitous s of ransomware and cryptojacking. 6,7Detecting, defending against and deterring new cybercrimes are as important as managing known threats. “Cyberattacks” are the most pressing risk for chief cutive officers in Europe and North America, and in six of the 10 largest economies the United States, Germany, the United Kingdom, France, Italy and Canada. These regions have been the subject of multiple and notable incidents over the past year. The LockerGoga ransomware was used to attack prominent industrial and manufacturing companies in France, Norway and the United States; digitized public services were breached in multiple cities in the United States, including Atlanta and Baltimore; and the European Central Bank shut down an external website after it detected a possible compromise of personal data. Environmental challenges for business As opposed to the Global Risks Report, which gathers survey responses from the Forum’s global multistakeholder network see ology, this report is based on responses to our cutive Opinion Survey, which polls the private- sector community. Thus, it reflects both a country-level and a business perspective on global risks that varies from region to region. In the case of environmental risks, “extreme weather events”, “failure of climate- change adaptation” and “natural catastrophes” were ranked in the top ten risks for business leaders in East Asia and the Pacific and North America, but not in other regions. By contrast, these risks have dominated the rankings of Global Risks Perception for the past several years. Notwithstanding these different perspectives, the Regional Risks for Doing Business report complements our broader risks work in allowing our many stakeholders to identify common concerns, detect potential blind spots and promote coordinated risk mitigation. A series of illuminated keyboards at an electronics fair in Berlin, Germany. REUTERS/Hannibal Hanschke11 Regional Risks for Doing Business Regional profiles12 Regional Risks for Doing Business Marked by recent events, businesses in East Asia and the Pacific face risks on four different fronts environmental, technological, geopolitical and economic. East Asia and the Pacific Top ten risks in East Asia and the Pacific 1. Natural catastrophes 2. Cyberattacks 3. Interstate conflict 4. Fiscal crises 5. Extreme weather events 6. Asset bubble 7. Data fraud or theft 8. Energy price shock 9. Unemployment or underemployment 10. Failure of national governance Environmental risks are the leading concerns for doing business across East Asia and the Pacific, with “natural catastrophes” ranking first and “extreme weather events” ranking fifth. The concerns about “natural catastrophes” were heavily driven by responses from Japan and New Zealand, where they ranked first, while in Indonesia and the Philippines they ranked third. The devastating earthquake and tsunami that struck Indonesia in September 2018, and the flash floods that hit Japan earlier that year, are just two cases of increasingly frequent natural disasters in Asia and the Pacific that stress the need for strengthening resilience against future catastrophes. 8According to the Centre for Research on Epidemiology of Disasters, the broader Asia Pacific Region witnessed 50 of all the natural disasters in the world during 2018. The disasters in the region claimed over 80 of the total deaths, affected over 50 million people, and totalled 56.8 billion in costs. Asia Pacific not only suffers the most from natural disasters and extreme weather events in terms of loss of life, but its large and highly vulnerable population make the region especially susceptible to economic losses. Industrialization and unplanned urbanization have also led to environmental degradation, which weakens the region’s natural defences against disasters. If unchecked, natural catastrophes run the risk of further eroding East Asia and the Pacific’s economic competitiveness. Chief cutive officers in the region identified “cyberattacks” as the second most pressing risk for business. All of the countries in the region, except for Cambodia, Laos and Viet Nam, rated “cyberattacks” as one of their top risks. In Singapore, this was the top threat to business, with nearly 80 of the respondents ranking it first. The effect of the 2018 cyberattack on its largest health group, which leaked the personal data of nearly 1.5 million people, including the prime minister, is still influencing the way Singaporean businesspeople