Gartner’s Emerging Risks Report revealed that a macroeconomic downturn has now joined the ranks of the top five concerns among 330 senior executives surveyed by Gartner in the first quarter of 2022.
“The macroeconomic environment was already challenging before Russia’s invasion of Ukraine, marked by persistent inflation and supply chain bottlenecks, which remain largely unresolved,” said Matt Shinkman, vice president with the Gartner Legal, Risk & Compliance practice.
He added that executives now face a spread of risks that are difficult to plan against, including contagion effects from war in Europe, aggressive Central Bank tightening, and continued COVID-19 pressure on growth in major global markets.
New Ransomware Models, given increased urgency due to Russia’s invasion of Ukraine and Post pandemic Talent remained the top overall emerging risks, in line with findings from the previous two quarters (See Table 1).
Table 1. Top Five Risks by Overall Risk Score and Frequency
The risk of a macroeconomic downturn has three key root causes that have driven it towards the forefront of executives’ minds at the start of 2022:
Central Bank rate hikes – The Federal Reserve and other major central banks have taken a hawkish stance that has driven concerns about a market correction and lower overall liquidity in global markets.
Russia’s invasion of Ukraine – Fears of contagion effects have grown as the war continues and has driven higher-level concerns about a global economic reset and the unpredictable effects of deglobalization.
COVID-19 variants – The persistent presence of COVID-19 and the potential for new variants continue to limit global market access and restrict economic growth.
Looming economic downturn
Concerns about an economic downturn were felt most acutely in some of the most economically sensitive sectors, including consumer discretionary, basic materials and financial services, where 75% or more of industry respondents indicated it as a top risk. The economic downturn risk was ranked highest regionally in the Asia Pacific region.
Shinkman noted that the potential for an economic downturn has significant implications for enterprise risk management (ERM) teams who may have initially planned for a more aggressive organizational risk posture this year in anticipation of an economic rebound and diminished impacts from COVID-19.
“ERM leaders must work with their business partners to reset many assumptions that occurred before the outbreak of war and confirmation of aggressive quantitative tightening,” said Shinkman. “Without adjusting plans for these new realities, organizations face an appetite risk balance that could see them taking either too much risk, or otherwise being unprepared for opportunities presented by a downturn.”
