Top Risks Facing Organizations in the Middle East and Africa

Current Risks

At the time the 2023 Global Risk Management Survey was conducted, the economy in the Middle East and North Africa (MENA) region was rebounding and in the process of bouncing back to where it was pre-COVID. However, numerous factors, including the looming presence of a potential recession, spiking inflation and interest rates, and significant geopolitical volatility, are creating further uncertainty.

Top 10 Current Risks: Middle East and Africa

1. Economic Slowdown or Slow Recovery
2. Exchange Rate Fluctuation
3. Business Interruption
4. Cash Flow or Liquidity Risk
5. Political Risk
6. Cyber Attack or Data Breach
7. Supply Chain or Distribution Failure
8. Commodity Price Risk or Scarcity of Materials
9. Failure to Attract or Retain Top Talent
10. Failure to Innovate or Meet Customer Needs

As such, the risk landscape is evolving quickly and will continue to do so for the foreseeable future. In response, organizations have placed a renewed focus on increasing risk resilience to navigate the volatility, and they are paying particular attention to finance-related risks. This is likely to be driven in part by recent economic shocks. After a period of rapid growth in the region in 2022, largely a result of the spike in oil prices and production that followed the onset of the conflict in Ukraine, economic activity slowed dramatically. Oil production levels and prices fell sharply, and even oil-producing countries that were leading in growth in the region were contending with complex economic hardships at the time our survey was conducted.¹

These and other macroeconomic factors, combined with the impact COVID-19 had on the financial wellbeing of companies and individuals, are reflected in the top current risk rankings in the 2023 survey: economic slowdown or slow recovery ranked number one in the MENA region, followed by exchange rate fluctuation, business interruption, and cashflow or liquidity risk at numbers two, three, and four, respectively. All of these risks illustrate how overlapping and multifaceted forms of volatility lead to distinct concerns regarding the region’s economic circumstances. Currency depreciation, unemployment and trade challenges are all indicators of a turbulent economy in which financial risks are among the chief concerns in the region.  

Furthermore, the disruptions caused by the ongoing conflicts in Ukraine and Sudan have increased focus on political risk, ranked number five, as well as supply chain disruption, ranked number seven. The events unfolding in Israel and Gaza—which happened after our survey was completed—have only heightened these risks by creating further instability in the region. The combined geopolitical volatility carries the danger of further damping business confidence and investment and other far-reaching economic ramifications.

Underrated Risks

While an emphasis on financials is to be expected due to the economic slump, leaders have partially turned their attention away from climate-related risks. Climate change and environmental social governance (ESG) or corporate social responsibility (CSR) weren't ranked in the top 10 risks for the region. This is despite these two risks having a significant impact on the corporate landscape around the world as businesses and countries emphasize ESG reporting and sustainability goals to address climate change. Furthermore, environmental hazards are becoming more frequent and severe, as demonstrated by the natural catastrophes in Libya and Morocco in September 2023. 

The lack of ESG- and climate-related risks in the top rankings may not be down to indifference but rather a result of the more immediate and pressing concerns of other risk factors.

Nevertheless, there are organizations and countries within the region that are actively working to mitigate the impacts of climate change. Many nations in the MENA+ region, such as the UAE, Oman, South Africa, Kuwait, Bahrain and Ghana, have pledged to achieve net-zero emissions by 2030. And COP28, hosted in the UAE, evidences the many leaders from across the MENA region engaged in work to address the issue of climate change.

Future Risks

Urgency around cyber risk has declined in the MENA region, falling from second place in 2021 to sixth in 2023. With changes to working culture across all sectors globally, businesses have had to generally increase their attention to and investment in infrastructure for information and operational technology to adapt, which may explain why cyber risk is being deprioritized. However, given that it is ranked as a top concern globally in 2023 and projected to be one in the future, boardroom discussions will likely focus on how new and rapidly evolving technologies, such as artificial intelligence (AI), may threaten an organization.

Top 10 Future Risks: Middle East and Africa

1. Economic Slowdown or Slow Recovery
2. Political Risk
3. Business Interruption
4. Failure to Attract or Retain Top Talent
5. Cash Flow or Liquidity Risk
6. Cyber Attacks or Data Breach
7. Commodity Price Risk or Scarcity of Materials
8. Exchange Rate Fluctuation
9. Interest Rate Fluctuation
10. Increasing Competition

New working cultures have also changed the way businesses think about failure to attract or retain top talent. While only in ninth place for 2023, it is placed fourth in future risks—indicating that the current trajectory among organizations in the region will likely include precautions to mitigate a potential talent shortage, such as changes to employee value propositions. Competition for employee benefits has intensified because of an increased focus on employee wellbeing, and some companies may be struggling to keep up with new paradigms. Despite difficulties in attracting talent, the MENA region has notably high unemployment rates, especially among young working-age people.² Finding a way to bridge the gap between low employment and the demand for talent could be key to organizations’ success in the future. 

Political risk, rising from fifth place in the top current risks list to second in future risks, signals uncertainty surrounding governance, while exchange rate fluctuation dropping from second place to eighth in future risks shows hopes for abating currency depreciation and eased inflation. The Israel–Hamas conflict is causing instability in the region, which could worsen if it spills over into neighboring countries. The potential impact on oil prices, which would drive increases across the globe for production of many goods, will be a key concern for leaders in the region. 

How Can Organizations in the Middle East and Africa Mitigate These Risks Effectively?

Although the insurance market has evolved since the pandemic, bringing with it better awareness and understanding of risk, off-the-shelf insurance products purchased by organizations don’t address specific underlying risks. As such, organizations that opt for them may not achieve a fully effective risk transfer or provide essential support for employee attraction and retention.

Given the range of rapidly changing circumstances, companies should continue to be cautious and analyze their sources of risk. Regularly surveying your risk profile can go a long way toward minimizing vulnerabilities. Including added cyber protection to account for new work models, such as employee cyber awareness training, can help mitigate the risks presented by new technology. To help companies remain competitive during a potential talent shortage, implementing effective benefits, programs to support emotional wellbeing and long-term career development opportunities can all help reduce the risks associated with the failure to attract and retain talent.

While economic growth in the region shows signs of picking up again,³ maintaining awareness of the fluctuating economic landscape and how it is affecting business operations, the workforce and the labor market can help organizations navigate uncertainty. Additionally, diversifying strategies and taking greater advantage of opportunities in green and digital markets could offer near-term growth while providing a buffer amid economic and geopolitical volatility. The region has the highest youth unemployment rate in the world, and addressing this through efforts to build a future talent pipeline is essential to securing future growth.

A balance of human capital and risk capital is essential to a company’s growth and overall health. The mapping of risk within an organization is more critical than ever, and securing tools and procedures to analyze, measure and mitigate risk should be a priority for most organizations.

¹ Middle East and North Africa Economic Update, The World Bank, October 2023
² Jobs Undone: Stagnant MENA Labor Markets Need a Level Playing Field, The World Bank, May 2022
³ Middle East growth to recover in 2024 but structural issues to weigh, IMF says, Reuters, October 2023

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