By Robert Quartly-Janeiro and Stuart Thomson.

At the recent World Economic Forum, the talk was of the economic and geopolitical concerns that Fortune 500 CEOs, leading investors, journalists, and politicians have in the current global environment. Such concerns increase the need for public affairs activity. Without it, risk is not being managed.

Speaking at the Forum held in Davos, Christoph Schweizer and Mai-Britt Poulsen of BCG, believed that trust in institutions is eroding and that no one they spoke to had a solution to the issues at hand. Tellingly, the show of hands to a question posed by Thorold Barker ‘Is the world deglobalizing?’ in a room full of internationalists, told its own story.

In recent weeks, we have seen changes in UK energy taxes, movement on EU energy policy, pressure in the US for gun law reform, a political crisis in Pakistan, Sri Lanka moving towards social and economic collapse, and instability in China’s Belt and Road initiative, at least as far as Pakistan and Sri Lanka are concerned.

Closer to home, Macron’s recent Presidential victory in France has left questions about his programme for the next five years, and Boris Johnson's leadership limps on following his hollow victory in a 'vote of confidence'. In addition, with inflation at 9 percent but unofficially closer to 40 percent (or more) for some goods, the global cost of living crisis is a political and geopolitical risk in and of itself - less we forget how the cost of food and political interference led to the death of Tunisian fruit seller Mohamed Bouazizi, and the start of what became the Arab Spring.

Elsewhere, China’s President Xi is said to be pondering conflict with Taiwan and is seeking a growth solution to his economic crisis at home. All these issues, and many more, will eventually filter into the global economy.

Forecasting for different outcomes

The economic and political changes will have a material impact on the regulation, direction, and industrial strategy of most sectors. Public finances too will continue to be under considerable pressure.

Then there is the issue of how governments operate. Plans to reduce the UK civil service by over 90,000 are not being accompanied by any consideration of what the government should be doing less of. So, there is the scope of government activity to consider as well.

In addition, moves in financial markets show the signs of tough times ahead with capital flight from emerging markets drawing parallels with the 1997 Asian Financial Crisis, and with commodity prices and the dollar rising this presents problems and economic policy opportunities.

Essentially, there are three competing scenarios to prepare for:

1) A ‘bump in the road’ – where things largely continue as before, geopolitical tensions recede, inflationary and economic headwinds are swiftly overcome, growth continues, globalisation progresses, and centrist politicians remain in power. Many policy positions that are now, continue as before.

2) Division – where governments are toppled because of food, energy, economic, and climate issues in favour of opposition parties and coalitions of opposition drawn from the left and right; sometimes in government together. De-globalisation and protectionism gather pace in certain countries as economic issues are not overcome for complex reasons such as investor sentiment or slides in foreign exchange values alongside the impact that has on food and energy prices. Geopolitical issues increase: Russian aggression in Eastern Europe spreads; China seeks to undercut the West; NATO, the USA, and E.U. look to do the same to counter Russia and China; aggressive political and anti-western movements rejuvenate in the wake of poverty and political change.

3) Reform – a mix of the other two where change happens but over a longer period and in a milder form. Issues such as industrial policy, ESG, trade, and foreign policy fragment away from the international consensus.

The emphasis on public affairs

Whatever happens, political expertise will be more valuable than ever not just in informing strategy but market positioning too. The ability to connect with politicians of all colours and persuasions is paramount to help good ideas to flourish in uncertain times. If the fears of attendees to the World Economic Forum do materialise then the role for public affairs increases.

What should be the immediate steps that organisations should take?

1) Put monitoring and intelligence processes in place – this means you are ready to move and manage the risk.

2) Solutions and ideas – always prepare a solution for any problem being encountered. The emphasis of government is always on delivery and that will only increase, as well the need to move at pace.

3) Develop a network of contacts – so that decision-makers have a level of understanding about your key issues and your reputation with them is already developed.

Public affairs may be in for a boom but only if organisations recognise its value and support it.

That is up to us all to communicate.

 

Dr Stuart Thomson is Head of Public Affairs at law firm, BDB Pitmans.

Robert Quartly-Janeiro specialises in domestic & international corporate affairs and political advisory.

 

Image by the-lightwriter on iStock