How could the $220 trillion shadow banking gambling casino blow up your business prospects?
The Looming Shadow: Leveraged Shadow Banking and the 2024 Risk Horizon
As we peer into the economic crystal ball of 2024, one spectre looms large: the potential for a crisis borne from the murky depths of leveraged shadow banking. While whispers of this risk have swirled for years, the confluence of several factors – rising interest rates, geopolitical tensions, and an interconnected financial landscape – amplifies the potential for a shockwave to ripple through the global economy. As business leaders, navigating this uncharted territory requires an understanding of the threat and proactive measures to ensure our ships weather the storm.
Delving into the Shadows:
Shadow banking encompasses a vast network of non-traditional financial institutions operating outside the regulatory purview of the formal banking system. Think investment funds, hedge funds, money market funds, and other entities engaging in lending, credit extension, and other activities typically associated with banks. The key differentiator lies in their funding – they rely heavily on borrowed money (leverage) to amplify their investment capacity, amplifying potential returns, but also magnifying risk.
This reliance on leverage creates a precarious scenario. Rising interest rates, a reality in 2023, increased the cost of borrowing for shadow banks, squeezing their profit margins and potentially triggering a wave of defaults on their obligations. This domino effect could cascade through the financial system, impacting traditional banks reliant on shadow banking for liquidity and investment opportunities.
The Perfect Storm:
Beyond interest rates, several storm clouds gather on the horizon. Geopolitical tensions, particularly around resource-rich regions, could disrupt global supply chains and trigger commodity price volatility, further squeezing margins for shadow banks heavily invested in such assets. Additionally, the interconnectedness of the financial system means a crisis in one corner can rapidly spread, amplifying the overall impact.
The 2024 Risk Horizon:
While predicting the exact timing of a potential crisis is a fool’s errand, 2024 presents several worrying factors. The lagged effects of interest rate hikes could manifest, geopolitical flashpoints remain simmering, and the post-pandemic economic recovery has yet to be fully cemented. This confluence of risks creates a perfect storm for a shadow banking crisis, with potentially devastating consequences.
Protecting Your Business:
So, what can business leaders do to safeguard their organisations? Several proactive measures are key:
Strengthen Liquidity: Build robust cash reserves to weather potential disruptions in credit availability.
Diversify Funding Sources: Reduce reliance on shadow banking and diversify funding sources to traditional banks and alternative forms of financing.
Stress Test Scenarios: Run stress tests to understand your exposure to potential shadow banking-related shocks and identify vulnerabilities.
Reduce Leverage: Minimise dependence on borrowed capital to lessen the impact of rising interest rates.
Scenario Planning: Develop contingency plans for various crisis scenarios to ensure swift and decisive action when needed.
Beyond internal measures, advocating for stronger regulatory oversight of the shadow banking system is crucial. Pushing for greater transparency, capital adequacy requirements, and risk management protocols can mitigate the systemic risks emanating from this opaque corner of finance.
A Call to Action:
The potential for a shadow banking crisis in 2024 is not a foregone conclusion; it is a call to action. By understanding the risks, adopting proactive measures, and advocating for responsible regulation, we can navigate these perilous waters and ensure the continued prosperity of our businesses and the global economy. Remember, vigilance, diversification, and preparedness are our anchors in the coming storm. Let us act with foresight and build a future where shadows no longer threaten the economic sun.
The risks from shadow banking is another reason interest rate cuts in USA, EU and UK would be welcome but much needed regulation of the 220 trillion dollars invested in this area is probably not going to happen until 2025 at the earliest – if at all. Ironically the leverage problem is due to financial institutions lack of money!
How can business leaders protect and grow their business regardless of business environment
Do not panic! Think about and implement new strategies to reduce negative risks to your business. Be better prepared for downside risks. Discover fresh ideas to tackle risk management challenges.
Risk events can destroy a business strategy. Best laid plans … Managing business risks is crucial to maximise business performance. How do you identify and mitigate strategic operational and project risks?
How To Manage Risk In Business
Take The Leap Into Your Future Business Success With More Confidence
Analyse the risk so you can decide on its importance in relation to your business objectives.
Prioritise your available business resources to tackle the key business risks for the best return on your risk management time and money.
Assign responsibility for each key risk to your senior management team members. If no one is going to be held account for failure to manage key risks then there will be insufficient consideration of the risk.
Monitor and review your key business risks and effectiveness of associated risk management measures. If the net risk rises then you may need to make changes to you risk management plan. If the net risk reduces you may assign less management time to controlling it but still allocate responsibility for controlling the risk to a key senior management team member.
Risk Identification
Identify potential problems that could cause your business trouble. The business risk can be an event or it can be a condition like changing business environment.
Identify and assess your enterprise risks better
Risk Mitigation
International Trade Hub
Design a risk mitigation plan eliminate or minimise the impact of the risk on your business objectives. After evaluating the risk pick a risk mitigation strategy that avoids reduces or transfers the risk. Alternatively accept the risk as part and parcel of achieving business objectives.
Select and commit business resources required for specific risk mitigation strategies.
BusinessRiskTV
Seek out guidance on how to identify the risks your business may face. Understand how to respond to risk events. Put new risk management systems in place to deal with the risks cost effectively.
Learn how to develop a risk management plan to protect your business. Find ways to minimise business risks with a new risk management strategy and approach for managing.
Reduce not only the likelihood of an event occurring but also the potential impact. Make sure you also consider the opportunities to grow your business when determining how best to manage risks.
Subscribe to BusinessRiskTV for free risk management alerts bulletins and reviews to your email inbox
Work with BusinessRiskTV to identify alternative risk mitigation strategies methods tools and techniques for each key risk. Get risk management advice on how to control and minimise negative effects of key risks from network of risk management experts.
Practical guidance on strategic risk management with BusinessRiskTV.com
Strategic Risk A Guide For Senior Managers and Executives
Strategic risk magazine guidance tips and advice. Interested in managing strategic risk better? Tips advice and practical guidance on strategic risk management. Discover how to manage strategic risks better. Inform your strategic risk management thinking.
Define your corporate risk tolerance and appetite for risk levels to inform your strategic decision making.
BusinessRiskTV
Receive free alerts bulletins and reviews on strategic risk management practices. Take a holistic approach to management of strategic risks.
Subscribe to BusinessRiskTV.com for free enter code #StrategicPlanning
Global Strategic Risks: What Businesses Need to Know
In today’s increasingly interconnected world, businesses are not just affected by risks within their own industry or country, but also by global strategic risks that can have far-reaching consequences. These risks can arise from geopolitical, economic, technological, environmental, and societal factors, and can impact businesses in a multitude of ways, from supply chain disruptions to reputational damage.
In this article, we’ll explore some of the most significant global strategic risks facing businesses today, and discuss how businesses can prepare themselves to mitigate these risks and remain resilient in the face of uncertainty.
Geopolitical Risks
Geopolitical risks refer to risks that arise from political factors and can have an impact on businesses operating in a particular region or globally. These risks can arise from changes in government policies, political instability, geopolitical tensions, and trade disputes, among other factors.
One of the most significant geopolitical risks currently facing businesses is the rise of economic nationalism and protectionism. In recent years, we have seen a trend towards governments implementing policies to protect domestic industries and workers, which can lead to increased tariffs, trade barriers, and restrictions on foreign investment. These policies can have a significant impact on businesses that rely on international trade and investment, particularly those in the manufacturing and services sectors.
Another geopolitical risk is the increasing geopolitical tensions between major powers such as the US, China, and Russia. These tensions can lead to increased military spending, arms races, and regional conflicts, which can disrupt global supply chains and cause economic uncertainty.
Businesses need to be aware of geopolitical risks and prepare themselves to mitigate their impact. This can involve diversifying supply chains, developing contingency plans, and monitoring political developments in the regions in which they operate.
Economic Risks
Economic risks refer to risks that arise from changes in the global economy and can impact businesses in a variety of ways, from changes in consumer demand to fluctuations in commodity prices. These risks can arise from a variety of factors, including changes in interest rates, inflation, and exchange rates.
One of the most significant economic risks currently facing businesses is the threat of a global economic recession. While the global economy has experienced a period of sustained growth in recent years, there are concerns that this growth may be slowing, and that a recession could be on the horizon. A global recession could have significant impacts on businesses, particularly those in the retail and hospitality sectors.
Another economic risk is the increasing use of automation and artificial intelligence in the workplace. While these technologies have the potential to increase efficiency and productivity, they can also lead to job losses and a shift in the nature of work. Businesses need to be aware of these trends and prepare themselves to adapt to changing economic conditions.
To mitigate economic risks, businesses can take a range of actions, including diversifying their revenue streams, investing in innovation and technology, and maintaining a strong financial position.
Technological Risks
Technological risks refer to risks that arise from changes in technology and can impact businesses in a variety of ways, from cyber threats to disruptions caused by new technologies. These risks can arise from a variety of factors, including changes in consumer behaviour, advancements in artificial intelligence and robotics, and the increasing use of data analytics.
One of the most significant technological risks currently facing businesses is the threat of cyber attacks. Cyber attacks can have a significant impact on businesses, from the theft of sensitive data to disruptions in business operations. Businesses need to be aware of the risks posed by cyber attacks and take steps to protect themselves, such as implementing robust cybersecurity measures and regularly reviewing their security protocols.
Another technological risk is the increasing use of automation and robotics in the workplace. While these technologies can increase efficiency and productivity, they can also lead to job losses and a shift in the nature of work. Businesses need to be aware of these trends and prepare themselves to adapt to changing technological conditions.
To mitigate technological risks, businesses can invest in cybersecurity measures, regularly review their technology infrastructure, and adopt a culture of innovation and adaptation.
Environmental Risks
Environmental risks refer to risks that arise from changes in the natural environment and can impact businesses in a variety of ways, from supply chain disruptions to regulatory changes. These risks can arise from a variety of factors, including climate change, natural disasters, and resource depletion.
One of the most significant environmental risks currently facing businesses is the impact of climate change. Climate change can lead to increased frequency and severity of natural disasters, as well as changes in weather patterns that can disrupt supply chains and business operations. Businesses need to be aware of the risks posed by climate change and take steps to reduce their environmental footprint, such as investing in renewable energy and reducing waste.
Another environmental risk is the depletion of natural resources, such as water and minerals. Businesses that rely on these resources need to be aware of the risks posed by resource depletion and take steps to diversify their supply chains and reduce their reliance on finite resources.
To mitigate environmental risks, businesses can invest in sustainable practices, reduce waste, and adopt a culture of environmental responsibility.
Societal Risks
Societal risks refer to risks that arise from changes in society and can impact businesses in a variety of ways, from changes in consumer behavior to reputational damage. These risks can arise from a variety of factors, including changes in demographics, shifts in cultural values, and changes in consumer preferences.
One of the most significant societal risks currently facing businesses is the rise of social media and online activism. Social media can amplify negative feedback and criticisms of businesses, leading to reputational damage and decreased consumer trust. Businesses need to be aware of the risks posed by social media and take steps to manage their online reputation and respond to criticisms in a timely and effective manner.
Another societal risk is the increasing focus on social and environmental responsibility. Consumers are becoming increasingly aware of the impact of their purchasing decisions on society and the environment, and are demanding that businesses act responsibly. Businesses that fail to meet these expectations risk losing consumer trust and damaging their reputation.
To mitigate societal risks, businesses can invest in social and environmental responsibility practices, regularly monitor their online reputation, and respond to criticisms in a transparent and accountable manner.
Businesses today face a range of global strategic risks that can have far-reaching consequences. These risks can arise from geopolitical, economic, technological, environmental, and societal factors, and can impact businesses in a variety of ways. To remain resilient in the face of uncertainty, businesses need to be aware of these risks and take steps to mitigate their impact. This can involve diversifying supply chains, investing in innovation and technology, reducing environmental impact, and adopting a culture of social and environmental responsibility. By taking a proactive approach to risk management, businesses can position themselves for long-term success in an increasingly uncertain world.
Promote and market your business on BusinessRiskTV for 12 months
Put your products and services in front of new buyers more innovatively to sell more online.
Find out how to promote your business locally and globally CLICK HERE
Link into your existing sales process or use our eCommerce solutions to increase sales cash flow and profit.
Increase your revenue streams more sustainably. Grow your business faster.
Read articles and watch videostream on strategic risks trending on BusinessRiskTV
Ways mindfulness can improve your work performance
Maximise your performance by restoring your mind and body with mindfulness techniques. Focus your mind and body on the most difficult task at the beginning of your working day. Do not try to do everything when you start work. Assess what is the most important thing to do to achieve your objectives and do it. This may not be the most urgent thing that needs doing.
Doing what is most important is better for you in long run than doing most urgent things.
BusinessRiskTV
Your business performance may come down to your attitude to risk. However focusing your resources on managing risks better could allow you to embrace business risks more build resilience and achieve better results.
Mindfulness can help you shift your response to business risks.
Be more relaxed that your business risks are under control.
Encourage a positive risk management culture.
Be more creative and innovative.
Improve decision making.
Encourage more responsible attitude to all stakeholders affected by your business activities
Rebalance your risk management process to take more holistic business risk management decisions. Optimise your business performance.
Subscribe to BusinessRiskTV for free alerts and bulletins on business enterprise risk management principles and best practices
Strategic business planning tips advice and support on BusinessRiskTV
Identify assess and manage what should be your strategic priorities. Prepare your business to achieve business goals and objectives with less uncertainty. Improve business performance. No company can avoid business risk. Develop a better risk based roadmap. Set and deliver business strategy your business leaders want. Take into account risk tolerance and appetite for risk.
You might be set for massive business success but what is realistic in the short medium and long term?
BusinessRiskTV
What should you focus your resources on?
What must you do to achieve what you want with less uncertainty?
What will work best for your business risk culture?
Prepare a realistic SMART risk based business strategy for greater success. Maximise the return of your investment of time and money. Control strategic operational and project risks better. Seize new business development opportunities. Plan for faster business growth.
Our Strategic Business Planning Workshops to help business leaders deliver better business results. Create an effective business strategy. Focus resources on key critical priorities for faster business growth.
Business Risk Management Magazine Free Subscription
Subscribe to BusinessRiskTV Strategic Business Planning Tips Advice and Support for Free
Helping business leaders grow
Finding the latest best business practices can be time consuming or unfruitful. We make business protection and growth easier and better.
Searching for what you need to inform your business decision making is free. Come back often to find the best of business online quickly. Pick up the latest business and economy news headlines opinions debate and business reviews.
Business leaders do not always have the marketing budget to promote their business. We provide a range of online marketing options for businesses to fit most budgets so you can promote your business products or services for longer.
