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Untangling Asia’s interconnected web of risks

How global risk trends in 2024 will impact Asia businesses’ growth and overseas expansion? Discover the latest expert insights from Marsh Asia.

Economic risks take centre stage in Asia

According to the WEF Global Risks Report 2024, the top-of-mind concerns among Asia’s executives are economic in nature: Seven out of 11 markets in the region consider economic downturn as the top risk, followed by concerns about talent shortage and inflation.

Although more than 60% of the top five risks  of concern among Asia’s executives comprise of economic risks, the global aggregate paints a different picture, with misinformation and disinformation as the top risk followed by extreme weather events, societal polarisation, cyber insecurity, and interstate armed conflict.

  • In particular, only Philippines, Indonesia, and Japan list extreme weather events among their top 5 risks of concern, even as typhoons, floods, and droughts have increased in frequency and severity due to climate change and resulted in rising losses from direct damage and supply chain disruptions across the region.
  • Only Japan, Taiwan (ROC), Hong Kong SAR, Singapore, and Korea list geopolitical risks among their top five risks, but recent events have shown that geopolitical tension can impact businesses’ supply chain and talent mobility, as well as heighten regulatory risks for global trade and cyber risks.
  • For societal risks, only Korea lists wealth and income inequality as a top five risk despite widespread concern of an impending economic downturn across Asia markets.

What does this mean for Asia’s businesses — especially multinationals — and how can they respond effectively and prioritise the right actions to take? 

As competing priorities wrestle for attention, businesses need to understand how risks can cause ripple effects across the globe, as an extreme weather event can be exacerbated by geoeconomic and societal risks.

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The ripple effect of Red Sea conflict: Global shipping and retail supply chains disrupted

The Suez Canal, which connects the Red Sea to the Mediterranean Sea, accounts for 10-15% of world trade and 30% of global container shipping volumes. Recent supply chain delays caused by the geopolitical situation in the Red Sea has been further exacerbated by extreme weather conditions that caused the Panama Canal to become impassable for extended periods. 

As a result of forced diversions and delays, rates for breach of warranty (BoW) insurance coverage have risen for a single voyage between seven to 14 days. Cargo markets are also charging a premium for sailing through the Red Sea, compared to no premium charged previously.

At the same time, businesses also face increased costs from higher fuel prices, shipping rates, and  the need for security escorts in waters with heightened security risks. The restricted availability of parts and components also greatly impact sectors such as energy markets, food and agriculture, metals, and manufacturing, particularly for industries with short ‘product-to-market’ life cycles.

How to address cargo shipment delays and short-term price hikes

Marsh Asia is advising businesses to renegotiate their contracts with freight forwarders to gain more control over the movement of goods, routes, use of subcontractors, and levels of liability.

From a risk transfer perspective, businesses should also review their marine cargo policy wordings and consider increasing the coverage for rerouting and costs associated with completion of voyage, even for delay-only scenarios where no physical damage has been incurred. 

For businesses directly involved in an attack, they can rely on Marsh Asia’s claims advisory expertise to ensure their interests are protected. 

Address potential disruptions within the supply chain

With supply chains and overseas operations facing frequent disruptions and regulatory changes arising from the uncertain global risk environment, businesses need to stay informed of local risk dynamics to identify emerging threats and assess and adapt their operating strategies.

Build a holistic picture through supply-value chain mapping

Specifically, businesses must anticipate and address upstream delays, which can result in reduced quantities and higher prices for inputs — especially commodity inputs such as energy and raw materials. Downstream, businesses might experience fulfilment and delivery delays, increased logistics expenses, and fluctuations or reduction in demand.

Diversifying suppliers is a common approach to mitigating supply chain risks. When adopting this approach, businesses should conduct supply-value chain mapping to understand the weak points in the diversified supply chain that are highly vulnerable to disruption. Businesses must also consider potential infrastructure challenges (e.g. reliability of electricity, clean water supply and transportation networks) and the complex regulatory requirements in these new locations (e.g. minimum wage, labour policies), which can evolve and pose significant risks if left unaddressed.

When investing in new locations, it is also imperative to calibrate the right workforce strategy in the three areas of pay equity, skills availability, and talent mobility.

In addition to supply-value chain mapping, businesses should also assess their political risk exposures  to identify geopolitical scenarios that might result in business interruption. 

Marsh Asia helps businesses model the impact of losing a source of input and formulate pre-emptive solutions, such as establishing contingency plans and security risk management measures.

In formulating risk management actions, we advise that businesses should not over-prioritise their risk management actions on higher value inputs (e.g. microprocessors) over lower value inputs (e.g. rubber gaskets), as any disruption can prove materially impactful. 

Chain reaction: Supply chain crisis and construction delays

Supply chain disruptions amid heightened global geopolitical tension have also impacted Asia’s construction sector. Notably, only about 8.5% of large projects finish on time and on budget,1 with delays exacerbated by material supply shortages, payment delays or defaults, talent shortages and mobility issues, as well as the suspension of state-sponsored infrastructure projects.

Furthermore, the economic downturn, armed conflict and civil unrest, protectionist government policies, and domestic electoral outcomes can change the construction regulatory and investment landscape, resulting in sudden and severe financial impacts for project owners and contractors. 

Minimising the cost of disruption and optimising outcomes

As each construction project has unique challenges and considerations, owners and contractors require a bespoke blend of risk management and insurance solutions.

With insurance broking, risk advisory, and dedicated claims professionals and forensic accounting teams supporting our Construction Practice, Marsh Asia actively supports owners and contractors across Asia, empowering project teams to mitigate delay-related losses  by quantifying risks through modelling, articulating the risks effectively to the insurance market, and advising on the strategic allocation of risks in contracts.

By providing expert guidance and a clear framework for resolving issues, Marsh can tailor a robust risk management and transfer strategy for construction projects regardless of their size and geography, helping them enhance trust and collaboration between stakeholders and deliver positive outcomes even when delays occur.


1 The Washington Post (2023): https://www.washingtonpost.com/transportation/2023/04/28/infrastructure-projects-time-budget/ 

Navigating the waves of global trade disruption and country risks

In Asia, social and political tensions continue to act as key risk considerations that inform businesses’ investment decisions. These tensions may impact workforce strategy and create an uncertain legal and regulatory environment. In particular, businesses with people, operations, assets, and investments in volatile markets can face heightened risks including expropriation, currency inconvertibility or non-transfer, and licence cancellation: 

  • In 2016, the Thai government decided not to renew the mining license held by one of the largest gold mines in Thailand, citing environmental and health concerns. This decision, which effectively led to the mine’s closure and expropriation, resulted in a legal and compensation claims dispute between the government and the mining company. 
  • In 2022, the Central Bank of Myanmar implemented regulations and restrictions on foreign currency flow and exchange requirements, which led to major financial losses for overseas investors.

Taking the right steps to manage country risk exposures

How can Asia’s businesses with global ambition better manage their country risk exposures with Enterprise Risk Management (ERM) and Political Risk Insurance? Watch the video to learn more:

For more insights on political risk, download Marsh's Political Risk Report 2024

Make sense of the emerging risk landscape in Asia

Schedule a non-obligatory chat with a Marsh representative and make more informed and confident risk management and insurance decisions today.