Top Risks in 2019

According to the Eurasia Group, a consultancy founded by Ian Bremmer, the global geopolitical environment is right now the most dangerous that it has been for many decades. So what is likely to impact on businesses, regional economies and society during 2019? There are around 10 areas of concern for us all.

Bad Seeds

There used to be an Australian band called The Bad Seeds, but we’re not talking about them. What the term ‘bad seeds’ means in this instance, is this: decision makers are so obsessed with an array of global crises in a world without trued global leadership, that they are allowing a range of future risks to take root and germinate, but these future risks are the ‘bad seeds.’ For example, the future of the European Union, the WTO and the relationship between Russia and China are negative.

US-China relations

The US leadership used to try and keep things smoothed over, but with Trump in office that approach has been dumped. Expect to see more confrontations between the two, especially in the areas of technology, economics and security.

Cyber Power

The US is going to exert its use of cyber power more seriously this year. However, it’s likely to backfire on it rather than create a system of global deterrence.

Populism in Europe

Europe is holding elections in May and it is likely that we will see more eurosceptics win seats. We have seen the rise of eurosceptics in the last two years, the UK and Italy being two prominent examples. These populists blame Brussels for their domestic problems and now they are winning support at home by promising to flout EU rules, or leaving the EU. They will win more seats and undermine the ability of the EU to function.

US domestic politics

The government has been closed down since before Christmas 2018. This year will bring more chaos and volatility to US domestic politics.

Reduced innovation

There will be a reduced level of investment in driving technological development. Eurasia Group believes this will be driven by concerns about security, privacy and economics, as leading countries “put up barriers to protect their emerging tech champions.”

Mexico

The new Mexican president Andres Manuel Lopez Obrador –or AMLO—wishes to improve Mexico by taking it back several decades. His strategy includes more spending and poor policies that are more interventionist. While Mexico was ahead of other Latin American countries, expect to see it look more like them this year.

Ukraine

Putin wants Ukraine to be within Russia’s sphere of influence. It is likely to interfere in Ukrainian elections this year, which will pose a problem, for Ukraine and leaders in the European Union who will have to decide how to respond.

Nigeria

This year Nigeria is about to hold one of its biggest and most fiercely contended elections since the country became a democracy in 1999. Neither of the two leading candidates have anything to offer the country, or policies that will reduce its problems.

Brexit

At the time of writing, the Parliament at Westminster is about to vote on the Withdrawal Agreement negotiated by Prime Minister Theresa May. Neither those who want to leave the EU, nor those who want to remain in the EU like it. Nobody knows what will happen when the deal is most likely voted down, but it is going to be an even bigger shambles in the UK throughout 2019 and that will affect the rest of Europe as well.

 

Tech innovation needs to find a balance in 2019

2018 put the spotlight on technological innovation, much of it venturing into uncharted territory where regulations will be needed before long. Amidst all the newcomers and startups, one old friend stands out as becoming more and more integral to our way of life, and that is the Internet.

Its reach into every industry is unstoppable, and as we move on from an app-centred era, there is going to be more engagement between policymakers and the technology innovators.

Steve Case, in his excellent thought piece at Medium, sums up the scenario:

“Investors will need to understand policy as well. In the Internet’s First Wave, the focus was on technology risk — can they build it. In the Second Wave, the key risk factor became market risk — there was little doubt it could be built, but considerable concern over which of the many app competitors would break through. In the Third Wave, policy risk will be front and center — can the entrepreneurs navigate the complex regulatory waters to successfully bring their product or service to market.”

Indeed, investors, entrepreneurs and governments will all be trying to find the right balance between regulation and innovation, as Case points out. This is necessary for the protection of society whilst also being open-minded about the potential of technology to improve life.

But what happened in the tech world during 2018 that has brought the issue of regulation versus innovation into focus? First there were the revelations about Facebook’s use of user data, which brought down on it the wrath of governments, as well as users. This is likely to mean the emergence of regulations to rein Facebook in.

There were also some serious data breaches affecting consumers. Privacy and security are no longer a given, which means consumers are no longer as confident when using online service providers.

Self-driving cars were a great story until a pedestrian got killed. They are still on the agenda for development, but now “innovators and policymakers need to work together to establish practices for safety and security (including cybersecurity),” Case suggests.

Space exploration got more interesting as it suddenly broke out of being controlled by NASA and other government-related agencies. This sector went commercial with SpaceX, and it is an exciting opportunity for innovation, but again we will need regulations for commercial ventures that protect the sector without stifling innovation.

2019 will be a year of finding the balance in these and other tech sectors.

Don’t be afraid of robots, says World Bank

The World Bank has published a report annually since 1978. Each report focuses on a detailed analysis of one aspect of economic development and for 2019 the topic is robots and automation and how it is impacting on the world of work.

Bloomberg interviewed Pinelopi Koujianou Goldberg, the World Bank’s Chief Economist, about the report and one of her first statements was: “This fear that robots have eliminated jobs — this fear is not supported by the evidence so far.”

The fear arises from the fact that in the first world a substantial number of jobs have been lost in the industrial sector, while in East Asia the there has been a rise in employment in industry. The World Bank report notes the anxiety about job losses, but claims “the number of jobs lost to automation is about equal to the number of jobs created, even if technology is changing the nature of those jobs in several ways.”

In the World Development Report 2019: The Changing Nature of Work, World Bank Group President Jim Yong Kim said:

“The nature of work is not only changing — it’s changing rapidly. We don’t know what jobs children in primary school today will compete for, because many of those jobs don’t exist yet. The great challenge is to equip them with the skills they’ll need no matter what future jobs look like — skills such as problem-solving and critical thinking, as well as interpersonal skills like empathy and collaboration. By measuring countries according to how well they’re investing in their people, we hope to help governments take active steps to better prepare their people to compete in the economy of the future.”

Koujianou Goldberg also commented on the changing nature of work, telling Bloomberg: “This is the fourth industrial revolution, there have been three before, and in each case we managed to survive so it’s not the case that machines completely eliminated humans.”

However, not everyone agrees with the World Bank’s assessment of the situation with regard to a radical change in the types of jobs available. Gizmodo argues that the World Bank has not considered the quality of the jobs available, or the social and cultural impact of the loss of certain jobs and responds to the idea of robotics bringing a fourth industrial revolution as an idea to be treated with caution. Gizmodo also says, “There is a reason that many of the regions hit hardest by automation voted in the largest numbers for Trump.”

It also points out that reports like the one from the World Bank are useful as a window into how elites — i.e., those doing a lot of the automating — view mechanization.

What is clear that there are good arguments from both viewpoints and that what we need is dialogue between the two, so that we plan for an industrial revolution that is less harmful to those communities most affected by automation than in the past.

Neobank trends in 2019

Neobanks as you probably know are digital-only banks and in the last year they have made significant inroads into the retail-banking sector. In part this is due to the loss of consumer trust in conventional banks, following the global recession and it is also due to growth in the customer’s willingness to use online banking and banking apps, rather than depend on a physical branch for services.

According to the Bank of England, it expects to receive at least 130 applications for banking licences before the UK leaves the European Union at the end of March 2019, which is another clue as to how this sector is growing; indeed, the majority of the most successful neobanks are for the moment, registered in the UK, Revolut being an example of one of the most successful of the new style banks.

Trends in 2019

What are likely to be the key trends in neobanking this year?

Marketplaces

Existing neobanks have set up marketplaces to provide customer-centric products as part of their collective mission to provide more than a digital version of traditional banking. This model is likely to expand and to gain more customers in the small and medium business market.

More accurate customer targeting

Neobanks are data driven and they have access to far more customer data than the traditional banks, simply because they are able to monitor customer behaviour through their use of the banks’ apps: Monzo for example, have their data analytics engine hooked directly onto their front-end and back-end systems. Also, Monzo for example, have their data analytics engine hooked directly onto their front-end and back-end systems, which puts them in a better position than the traditional banks and enables them to serve a bigger range of specific customer needs within their target markets.

More autonomy

Autonomy is the common key driver in each of the neobanks’ successes. The way they are structured and operate empowers each person or team to create products in whichever way they see fit, without the need for excessive governance structures. Even the traditional banks are starting to adopt this model and we will see more neobank offshoots of the big retail banks in 2019.