The UAE is something of a regional outlier in the survey – respondents focused on technology-related risks in a very similar way to their counterparts in Europe and North America, with “cyber-attacks” ranked first, “misuse of technology” in third place and “data fraud” in fourth.
However, although the UAE’s focus on technological risks is unusually pronounced, it is not unique. The combination of increasing sophistication in the regional economy and a global trend towards increased corporate focus on cyber risks in particular is evident in a number of other MENA countries.
Over 12,000 executives highlighted concerns ranging from economic to political, societal and technological. Unemployment, failure of national governance and energy price shocks were among the top worries of executives across various regions.
Top 10 risks facing the MENA region
- Energy price shock
- Unemployment or underemployment
- Terrorist attacks
- Failure of regional and global governance
- Fiscal crises
- Unmanageable inflation
- Water crises
- Illicit trade
- Failure of financial mechanism or institution
“The research was conducted with business leaders from across the region and beyond and is an opportunity to better understand not only the risks businesses face but how mitigating or transferring these risks can be an effective way of freeing up capital and driving growth. Political and economic risks continue to prevail across much of MENA with cyber-attacks growing in concern as the region’s economies become more sophisticated. Businesses who understand how to appropriately manage these concerns can grow their operations and reap the resulting financial rewards,” said, Christos Adamantiadis, CEO of Marsh for Middle East and Africa
Although “energy price shock” has risen from second place last year to become the top-ranked risk across the region, this development needs to be balanced with the fact that “fiscal crises” dropped sharply in the survey rankings, from first position last year to fifth in 2018. Oil prices increased substantially between the 2017 and 2018 surveys, from around $50 to $75. This represents a significant stimulus for the fiscal position of the region’s oil producers, with the IMF estimating that each $10 increase in oil prices should feed through to an improvement on the fiscal balance of three percentage points of GDP.
However, vulnerabilities to swings in oil prices have not disappeared, and are particularly pronounced in countries where government spending is rising. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil – that is, the price required to balance the national budget – rise to $88, 26% above the IMF’s October 2017 estimate, and also higher than the country’s medium-term oil-price target of $70–$80. It is no surprise, then, that Saudi Arabia remains one of five countries in the region that rank “energy price shock” as the top risk to doing business in our survey, along with Bahrain, Kuwait and Oman.
Although “unemployment and underemployment” is ranked second across the region as a whole, this reflects a consistent level of lower placings across all of the region’s countries (it is in the top ten in 12 of the region’s 15 countries), rather than great prominence in many of them. At a national level, this risk ranks in the top three for five countries: Bahrain, Egypt, Morocco, Oman and Tunisia. Nevertheless, unemployment is a pressing issue in the region, particularly for the rapidly expanding young population: youth unemployment averages around 25% and is close to 50% in Oman.
The ongoing need for regional action to mitigate environmental concerns was reflected in the fact that “water crises” ranked eighth across the region. In Egypt, respondents viewed “water crises” as the top risk to doing business. The potential severity of water-related risks has been highlighted in recent months by a scandal in Iraq that has led to a reported 17,000 people being poisoned by polluted drinking water.
The findings of the Regional Risks for Doing Business report are based on 12,548 responses from executives in 140 economies. Respondents were asked to select “the five global risks that you believe to be of most concern for doing business in your country within the next 10 years”. This question is included in the annual Executive Opinion Survey, which is a part of the World Economic Forum’sGlobal Competitiveness Report. The latest edition of the survey was carried out from January to June 2018. Business leaders were asked to choose up to five risks from a list of 30.
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© Press Release 2019