Here’s Why Economic Risk Is So Difficult To Predict

Economic Risk

Imagine you owned an oil or gas company in Venezuela when the President of the country announced the industry was going to be nationalized.

Or imagine you’re a major electronics retailer who cannot afford to stock iPhones any more because the price has become too expensive due to protests in China that have disrupted Apple’s supply chain.

Both of these examples highlight the likelihood that, no matter your industry, your investments will be impacted by macroeconomic conditions that are constantly shifting due to geopolitical risk.

Whether you’re forced to deal with skyrocketing inflation, supply chain disruptions, changing fiscal or monetary policies, or adverse consumer trends, economic risks are notoriously difficult to predict.  

And as soon as you start operating in another country, your economic risk grows.

Making things even more challenging is that if you ask any economist, they will most likely tell you that business cycles are extremely difficult to forecast because they are driven by random, unforeseen shocks or mistakes.

Those “unforeseen” events, however, are the very geopolitical risks that Infortal specializes in uncovering before they happen.

Which means when a government shifts its economic policies, or there’s political instability that leads to fluctuating exchange rates or regulatory risks, we’ll make sure you already have the right strategy and funds in place to comply with forthcoming regulations, as well as protect your business and your revenues. We help you to identify and effectively mitigate these business risks in advance.

For example, you could face a labor risk involving a lack of skilled human capital in a particular county or region due to a country’s immigration policies.  Or you might face a possible strike  because of a certain political climate or concerns over automation and regulation. 

And of course, everything you do could be affected by possible Energy Disruptions such as power grid attacks, regulations changes, or the introduction of new technology.  Because your energy risks will vary greatly by your industry, it’s critical to have timely political and regulatory assessments completed in order to anticipate any vulnerabilities to future energy problems, as well as how to make your business more resilient to them.

What will the next few years look like in your specific location or industry when it comes to the regulatory and political outlook that will dramatically affect your bottom line?  Infortal will help fill in those gaps for you, so you can be absolutely certain you’re making the best strategic decisions to combat economic risks now and into the future.

This includes being plagued by any potential manufacturing issues brought on by regulatory changes, labor laws, a change in access to raw materials, or more.  We can also help you determine the best production process or manufacturing plants that can lower your costs and production times, as well as where and how to adjust your supply chains to compensate for manufacturing risks.

CLE Accredited Courses

Infortal’s Continuing Legal Education (CLE) courses are designed to equip executives, attorneys and risk managers with strategic insights to navigate the complex landscape of geopolitical risk. We cover topics such as international sanctions, regulatory risks, corporate espionage, AML, global warfare, anti-terrorist financing and corruption.

We can help you make informed decisions and mitigate potential risks for your business.
LEARN MORE   

If you see that your competitors are doing well in an industry in which you are struggling, it may be because they are using a more efficient manufacturing process. Business intelligence including a competitor analysis from Infortal can not only help you determine what that is, but also how you can possibly apply it to your business successfully.

This is just one way you can use economic intelligence to increase your market share and perform better. You can also use political and business intelligence including regulatory risk assessment to determine which laws may be coming in the future that could affect your business. These legislative risks cannot be picked up simply by looking at lobbying efforts or political bill counts, you need a complete picture and political intelligence on every aspect of the political and cultural landscape, including how and when the laws will be actually implemented and enforced. Otherwise you risk having regulatory laws change how you can provide products and services to your customer base, as well as the risk that higher taxes could scare away your primary investors.

Similarly, a change in monetary policy at any time can drastically impact your business. Will your customers be able to spend more disposable income or will higher prices curtail your profits? Will inflation get out of control? If you had manufacturing plants in Europe after they moved to the Euro, you would have been in trouble when manufacturing collapsed due to higher pricing for parts – but only if you didn’t see such a change coming.

Infortal can also keep you well apprised of any exchange rate risks as well as any changes to the cost in capital that may arise from a change in monetary policy. Make sure you know ahead of time how your ability to borrow and receive venture capital will be affected in the future.

The kind of business environment you are facing will also have a major impact on your strategic decision making. Misreading the tea leaves on upcoming taxation, for example, can be a very costly error. Knowing whether there are more taxes coming in your specific industry sector can potentially save you millions. Our deep business intelligence services will let you know how easy it will be for you to conduct your business in a particular industry or region.

How easy will it be to produce your products or service and get it into the hands of your ideal customers? Infortal’s advisory services and intelligence reports will tell you.

 

Of course, there is no greater economic risk than the outbreak of war. The severe economic distress that any country goes through as they suffer through war is the greatest risk to your company.

Tariffs, blockades, sanctions, monetary disruption and even counterfeiting that result from war can stop your entire business in its tracks.

No war is able to be perfectly predicted, but Infortal’s intelligence reports can give you the lay of the land to determine exactly how countries are at odds with each other and the likelihood of significant events occurring between them based on an assessment of indicators of geo-economic tensions. And even if an actual war does not break out between them, countries that are in direct economic competition with each other can cripple your business in a myriad of ways if you are not prepared for it.

Labor/Human Capital

What does it take to stay ahead of your competition for the foreseeable future?

Energy Risks

When it comes to energy supply risks for your business, you’re only a regulatory change away from a complete business meltdown

Manufacturing Risks

If you were one of Detroit's major car manufacturers in the 1980’s, you were getting walloped by Japanese car companies.

Legislative Risks

What do you do if your legal team forewarns you about new regulatory laws in the works that could significantly alter the profitability of your business…

Monetary Risks

It might not be the first thing that comes to mind when thinking about protecting your business from future economic risks, but changes to monetary policy and monetary risks can put a huge damper on your bottom line.

Regulatory Risk

If you were a tech startup thinking about operating in Europe before 2018, you would have been in for a really bad surprise if you failed to conduct due diligence on the possible regulatory risks of operating there.

Business Environment

In order for your business to remain competitive and successful, you must stay on top of the fact that the environment you operate your business in is constantly shifting. 

Economic Warfare

While you are no doubt familiar with the economic sanctions placed on Russia as a result of their 2022 invasion of Ukraine, you may be less aware of how regular economic warfare between countries can impact your business.

Our team is available to assist

CLE Accredited Courses

Infortal’s Continuing Legal Education (CLE) courses are designed to equip executives, attorneys and risk managers with strategic insights to navigate the complex landscape of geopolitical risk. We cover topics such as international sanctions, regulatory risks, corporate espionage, AML, global warfare, anti-terrorist financing and corruption.

We can help you make informed decisions and mitigate potential risks for your business.
LEARN MORE