In this month's newsletter, we outline how Connected Risk will transform Regulation
Brexit fears fuel Geopolitical Uncertainty
01 July 2016 | Press Article
Published in the Insurance Insider's Inside Data
In recent articles Russell Group has outlined the challenges and risks facing global corporates in today's fracturing geopolitical environment.
Now that Brexit looks set to become a reality it is clear that geopolitical fractures and the extreme connectivity between nations and individuals are the key risks of our age, requiring new approaches to risk modelling and analysis.
Uncertainty over the potential impact of Brexit has already affected corporates, with stock markets across the globe crashing and business confidence wiped out. The impact is only going to deepen as the tangible benefits of the UK's relationship with the European Union (EU) are removed.
Political and sectarian ideology is becoming the key factor driving geopolitical volatility, while technology is making the world flatter as well as more connected. At the same time, cultural and religious divides cause their own fracture points and friction across economies around the world.
Fracturing wealth, social mobility and social cohesion, allied with religion tensions, are being played out in a grand narrative with implications for trade as these all too human drivers of change cut across each other.
As a white paper by Global Counsel stated: "Some of the tensions in the UK regarding the EU also exist in other states, even if they manifest themselves differently and to different extents. If the UK leaves, adopts a more independent policy in sensitive areas, and is seen to succeed, this could have far-reaching political ramifications for the rest of Europe. The 'proof of concept' of leaving the EU could liberate disintegrative, centrifugal forces elsewhere."
In such an environment, insurers would be wise to model a range of potential scenarios that could play out, including the impact on trade within Europe, foreign direct investment, liberalisation and regulation, immigration, trade policy and wider geopolitical uncertainty.