With 2016 fast approaching, Dun & Bradstreet economists are focused on identifying and assessing the trends that will shape the year ahead. Here are five trends to watch, based on insights drawn from D&B’s commercial database of over 240 million company records and our daily monitoring of regional events.
Compliance and Governance
From the Volkswagen scandal to China’s anticorruption drive hitting its stock market to Brazil’s governmental implosion in 2015, the list will only grow in 2016. This could be the year when investors and C-suite managers realize that the biggest blindside risks come from compliance violations that can have sizable effects on corporate earnings, and that this is a systemic, not a transitory, feature of the risk environment.
Diversification in Oil-Dependent Countries
As countries seek to adapt to what could be a new normal of lower oil prices, governments that have previously not supported investment outside the gas and oil sector will work to improve the business environment across the board. This is particularly the case for Russia and Central Asia, and in sectors such as agriculture. Investors should look to capitalize on the “first mover advantages” of investing early in these nascent sectors.
Battle for the Soul of the EU
With anti-EU parties doing very well in recent elections across the continent and immigration policy now competing with fiscal austerity for the title of EU deal-breaker, the European dream’s future appears fragile. While in 2016 the EU will not be on the verge of unraveling, the specter of closed borders (effectively reversing the EU’s single largest achievement) and slippages in implementing reform packages in southern eurozone members (remember, the eurozone crisis was postponed, not solved) will weigh on regional growth.
Terrorism is at the forefront of public consciousness, but in terms of impact on businesses, El Niño will be the more salient influence. It will cause manageable but noticeable market shocks for both hard and soft commodities via extreme rainfall, drought, and loading and lifting schedules for seaborne commodities. The debate from these phenomena will feed into the debate generated in the aftermath of the Paris conference in December 2015 and variations from historic average weather patterns from India to California. Predictive and real-time analytics to power supply chain intelligence and readiness will be growth areas.
The Known Unknowns
Finally, the foretold dramas — the events we know will take place and which may pass smoothly, or not. How will the US Fed interest rate normalization play out? Will the strong dollar act as a brake on US growth, suck up global liquidity, and cause emerging market currencies to plummet? Or will markets react positively to what is a long-overdue monetary policy normalization?
Will China’s job market, service sectors, and corporate bond market defy the deflation and the debt crises quietly engulfing upstream industry and swathes of northern China? Or will India take the baton from China as the fastest-growing major emerging market?
Will 2016 be a watershed for the global financial industry — will the additional regulatory burden so disrupt market liquidity and traditional financial sector earnings that the industry will undergo a painful transformation?
Under some of these scenarios, risk management will trump sales growth imperatives for businesses across the globe.
Oana Aristide is a Senior Economist on D&B’s Global Data, Insight and Analytics team. Based in the UK, she covers three Scandinavian countries as well as Romania, Japan, Malaysia, and the Philippines as a contributor to D&B’s Macro Market/Country Insight Products. She has a background in central banking.
This article originally appeared on CNBC.com.