Looking back at 2024: Key Geopolitical, Workforce, Inflation, Artificial Intelligence, and Risk Developments
Starting from the first moments of 2024, it became apparent that this year would deviate from the norm. As entrepreneurs ushered in the end of another year marked by substantial transformation, let's delve into how the forecasts for 2024 trends panned out. This analysis is set against the backdrop of boards and senior leadership teams pursuing growth, all the while managing risks and opportunities as they gaze into the future.
- 2024 will witness substantial geopolitical shifts and risks – As anticipated, 2024 was indeed a monumental year for geopolitical change and uncertainties. Referring to the Economist's term, it was hailed as the "Year of Historic Elections." National votes took place in over 60 nations and the EU, accounting for nearly half the global population. Many of these elections would carry significant consequences for future decades. Simultaneously, unresolved conflicts, such as Russia/Ukraine and Israel/Hamas, persisted. Additionally, the China/Taiwan row remained a source of concern. The geopolitical landscape is growing increasingly unstable, veering away from the traditional superpower duality and hegemony, providing newer nations with increased sway. Recent research from Willis Towers Watson reveals that geopolitical risks to businesses remain substantial and multifaceted. These hazards encompass factors like regulations, trade circumstances, tariffs, financial investments, market variabilities, property risks, commodity prices, inflation, supply chain, and employee safety. Prudent leaders remain vigilant, tracking developments at the national and local levels, mitigating risks when feasible, reformulating country-specific strategies, and preparing teams for swift and decisive action when necessary.
- Labor markets and work arrangements continue to evolve – As predicted, labor markets have shown increased stability compared to a year ago. The quit rates, labor participation, unemployment, and job openings in numerous countries have recovered to levels that might have been achieved without the pandemic. However, permanent demographic shifts, such as a decline in births, have created long-lasting talent shortages for certain professions and skills. Furthermore, the return to physical workspaces generated headlines worldwide, with real estate and job data highlighting significant differences in work environments across regions, countries, and even cities. Recent research from Willis Towers Watson reveals that flexible work trends are gradually shifting, with about two-thirds of U.S. companies implementing mandatory onsite attendance for a minimum number of days per week. In addition, many companies are adopting onshoring and nearshoring strategies to tackle geopolitical, supply chain, and talent availability issues. Effective leaders have adopted new talent strategies, with boards and senior management teams devoting more attention to culture, employee experiences, and transformations in pay, benefits, and career programs to cater to the complex needs of the workforce.
- Inflation and recession risks fade but persist – Based on country-specific analyses, inflation has generally decreased from January 2024 levels in most countries, and a majority of nations succeeded in dodging recessions (albeit narrowly). In nations like the UK, November's year-over-year Consumer Price Index (CPI) dropped to 2.6% (up from 1.7% in September). The Eurozone CPI rose to 2.2% (up from 1.7% in September), while the U.S. saw a rise to 2.7% (up from 2.4% in September). Consequently, many leaders concluded the year satisfied with the lower inflation compared to January 2024 but wary of its potential rebound. Exemplary leaders maintain a close watch on conditions, developing new growth strategies that consider rising costs.
- Leaders adopt new technology as governance matures and becomes more pragmatic – Organizations developed a more comprehensive understanding and governance of key technologies, such as generative AI, but many are still catching up. 2024 saw lawsuits, regulations, and security breaches that suggest that technology governance and application at the governmental and corporate levels is still in its infancy. Boards and senior leadership teams focused on technologies like generative AI, metaverses, spatial computing, and quantum computing to address challenges in their sectors. Effective leaders embrace these technologies, recognizing that they necessitate new skills and in-depth knowledge of their applications. They have transitioned from relying on traditional risk management and governance procedures to utilizing more dynamic governance models, harnessing the technology's potential while safeguarding the organization. They have also become more realistic about technology adoption's pace and impact on customers, employees, and performance, and have recalibrated expectations and commitments.
- Leaders concentrate on the impact of ESG factors on performance and risk rather than its ideology – Polarization in numerous countries ushered in significant changes in the ESG landscape in 2024. Many corporate stakeholders altered their focus on topics related to climate and diversity, equity, and inclusion (DEI), with some boards and management teams intensifying their efforts, others scaling back, and some completely abandoning the ESG agenda. Emerging risks varied significantly for directors and officers across various regions and organizations. Health and safety remained the most cited risks worldwide, while other risk factors differed by region. In the EU, the CSRD rules mandated that companies publish regular reports on their social and environmental risks and impact. In practicing stewardship, skillful leaders minimize ideological rhetoric, focusing on the actual impact of actions on business performance and risk.
- The debate around a potential 'baby bust' continued, with some economists warning of long-term labor force challenges due to declining fertility rates.
- The rise of hybrid work models, coupled with the Baby Bust, has increased the risk of skills gaps and talent shortages in certain sectors.
- In response to these trends, companies are turning to Artificial Intelligence (AI) and other technologies to automate routine tasks and increase efficiency.
- ESG factors have become increasingly important in investment decisions, with many institutional investors demanding greater transparency and accountability from companies on their environmental, social, and governance performance.
- The geopolitical risks and uncertainties have created new opportunities and challenges for businesses, necessitating a more strategic approach to risk management and a closer focus on long-term resilience.
