Titled for 2025: Anticipating Geopolitics, AI, Work, Inflation, and Human Risks
In the fifth consecutive year of anticipating change, business leaders find themselves navigating a volatile global environment. Effective leaders, adept at managing risks and adaptability, are keeping a close eye on the following trends and responding accordingly:
1. Geopolitical shifts and continual emergence of new risks
The world we live in today is witnessing events once considered rare, occurring more frequently and with unprecedented intensity. Businesses are forced to reconsider their strategies and operations due to the complex and nonlinear impacts these events have, varying by country and sector. The recent WTW Emerging Risk Survey indicates that the evolving risk landscape is far from slowing down, as indicated by instances such as the earliest Category 5 storm on record (Beryl), a global technology outage, ongoing conflicts in Ukraine and the Middle East, increased tensions in Taiwan and North Korea, the Baltimore bridge collapse, significant labor strikes, a high-profile CEO assassination, and "The Biggest Election Year in History."
Looking ahead to 2025, potential risks for businesses encompass:
- Climate threats (fires, floods, severe weather events)
- Pivots in rules and regulations
- Trade conditions and tariffs
- Market shifts
- Property peril
- Gray-zone attacks
- Shipping and global supply chains
- Infrastructure difficulties
- Cyberattacks
- Disinformation campaigns
- Commodity price fluctuations
- Inflation concerns
- Employee and executive security
Effective leaders reassess their current strategies to ensure they can navigate the current operating environment, rather than being subject to it. They mitigate potential hazards where possible, alter plans when necessary, and prepare their teams to respond swiftly and decisively as needed.
2. AI and technology will outpace adoption
Generative AI and other new technologies continue to astound users and leaders with their capabilities and limitations. As recent events demonstrate, such as the AI avatar running for Parliament in the UK, advanced robotics, and more effective multimodal and reasoning models. Notwithstanding setbacks in accessibility (falling short of expectations from AI coworking applications), imposters (technology progress not keeping pace with developments), and shortcomings in deployment abilities, all point to an early stage in the governance of technology and its usage.
In response, effective business leaders shift from reliance on traditional risk management and governance protocols to employing more dynamic governance models that account for the impact of technology on customers, employees, and overall performance. They also become more realistic in their expectations and modify commitments regarding the pace and impact of technology adoption.
3. Labor markets, inflation, work arrangements, and talent shortages
Many business leaders anticipate that labor markets, inflation, work arrangements, and talent shortages will stabilize in the mid-2020s. Although improvements in economic elements have been observed in many developed economies during the past year, crucial markets (such as the UK, Eurozone, U.S., and Canada) have recently experienced detrimental developments. Predictions suggest that if these trends persist, they could worsen in 2025.
Demographic shifts, including a baby bust, have led to long-term talent shortages in select jobs and skills that may persist for years. The debate over remote work and the return to offices remains ongoing in various regions, countries, and even cities. Research by WTW shows that despite increased policy formulations, an overwhelming 61% of US companies still require onsite attendance for a minimum number of days per week. Companies now onshore and nearshore in response to geopolitical concerns, supply chain complexities, and talent availability problems. Effective leaders monitor these issues closely and adapt their talent strategies accordingly.
4. Human capital remains at the forefront
Human capital is a priority topic for board members, with employee health and safety considered a top organizational risk. Companies with higher employee wellbeing outpace their peers and are more likely to succeed. Moreover, human capital becomes an integral aspect of enterprise risk management (ERM) frameworks. Effective leaders lead holistic and strategic human capital discussions, ensuring that human capital metrics are evaluated in the context of performance, productivity, and overall risk.
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4. Hybrid work and people risk
As businesses shift towards a hybrid work model, a new set of challenges emerges. Leaders must address 'people risk,' a term used to describe potential issues arising from the dynamic blend of in-office and remote work, such as lack of communication, employee disengagement, or increased cybersecurity threats. Effective leaders ensure that their organizations implement robust policies addressing these risks and prioritize employee well-being and satisfaction, as a positive work environment positively impacts productivity and overall success.
5. Geopolitics and pay adjustments
Geopolitical risks can lead to significant currency fluctuations and wage adjustments, affecting international operations and compensation structures. As crises unfold and sanctions are imposed, access to critical resources, markets, and talent pools can become limited, necessitating strategic adjustments. Effective leaders stay informed about geopolitical developments and employ flexible compensation designs that enable organizations to navigate these challenges while ensuring that staff remain engaged and motivated.
