We take a look at the top Connected Risks in 2018.
A ‘Connected Risk’ Presidency – Risks and Opportunities
20 January 2017 | Blog Post
In continuing with a longstanding and uniquely American tradition, Donald Trump will take the oath of office today, heralding the beginning of the Trump Presidency.
While much ink has been spilt on how a Trump Presidency will take shape, it seems futile to write more on the subject. For underwriters, Donald Trump’s inauguration brings the possibility of a ‘Connected Risk’ Presidency dominated by the Connected Risk drivers of Supply Chain, Trade Credit, Political Risk, Natural Perils and Cyber, which all overlap and impact on the insurance classes.
Despite, having run a campaign on a protectionist platform, Trump is pro- trade it seems but only with the right partners. In a far-ranging interview with The Times on Monday, Trump praised Brexit and indicated that he wants to move very quickly to secure a UK- US Trade deal, a move that will please Downing Street.
Simultaneously, in true Trump style, while praising Brexit, Trump turned his fire on German car manufacturers, BMW, Daimler & Volkswagen, threatening them with 35% U.S. import tariff. In addition, Trump threatened Toyota, saying that it could be subject to a big border tax if it builds Corolla cars for the U.S. market at a planned factory in Mexico.
Under President Trump, expect more supply chain and boardroom disruptions, as CEOs are bent to his will through the force of the most powerful man in the world’s Twitter account. This was the case for Boeing CEO Dennis Muilenburg who on Tuesday, announced a simplification of the next generation Air Force One planes after Trump’s public criticism.
After Trump’s previous tweets concerning China, it was no surprise that President Xi Jiping in a speech at Davos warned Trump against Protectionism, stating that ‘waging a trade war will only cause injury and loss to both sides’. The incoming Trump administration has many ‘unknowns’, but a definite known is that a Trump administration believes in a more Protectionist America, raising the spectre of a Trade war with China.
Climate Change was a large agenda for the outgoing Obama administration, as symbolised in the signing of the Paris Accords in 2016. However, under Trump, the thorny issue of climate change is very much in question. Scott Pruitt, Trump’s EPA pick in a Senate confirmation, reiterated his belief, that the ‘human role’ in climate change is still up for debate.
The greatest ‘unknown’ of a Trump administration is his relationship with Vladimir Putin. Despite the revelations of Russian cyber sabotage in the Presidential elections, Trump still intends to work with his Russian counterpart. In echoes of the Reagan-Gorbachev Reykjavik summit of 1986, Trump expressed a desire to meet with Putin and work to try and reduce Russia’s nuclear weapon arsenal – though he has been opaque as to whether the same applies to the U.S nuclear capability.
This is a mere snapshot of the numerous tasks, the incoming President deals with and the risks/opportunities that come with them. A more protectionist U.S could, for example, open the door for China to become a champion of free trade and Trump’s ambivalent attitude to climate change could again allow an opportunistic China to take the moral high ground and lead on environmental/sustainable energy issues. Who would have thought that 18 months ago?
Despite his rhetoric, a Trump Presidency will find it a real challenge operating in isolation, as the US is the world’s superpower operating in a connected world. Consequently, this means that risks to world stability end up on the President’s desk. How Trump manages these connected risks will determine the very success of his Presidency.