What Lies Ahead for Businesses in 2017?

From Trump to terror and regulatory concerns, Control Risks unveils its RiskMap 2017 in Jakarta

By Tellisa Ramadhani
Sunday, April 9, 2017

Every year, Control Risks, a global consulting firm specializing in political, security and integrity risk, releases RiskMap, a forecast of risks facing companies across the world. On March 17,the Control Risks team came to Jakarta as part of its global tour to its thoughts on what might lie ahead for Indonesia and the region.

Overall, the speakers at the event were reasonably optimistic about Indonesia. According to RiskMap 2017, the risk forecast is medium in terms of both security and political risk. The security risk rating evaluates the likelihood of state or non-state actors engaging in actions that harm the financial, physical and human assets of a company. The impact of security risk on companies can include theft, injury, kidnap, damage to installations, information theft, extortion, fraud, expropriation and loss of control over business.

The political risk rating evaluates the likelihood of state or non-state political actors negatively affecting business operations in a country. The impact can include negative government policy, judicial insecurity, exposure to corruption, reputational damage, expropriation and nationalization, and international sanctions.

According to the RiskMap’s take on Asia, China will no longer lead the region’s GDP growth, and will be replaced by India and Association of Southeast Asian Nations (ASEAN) countries. It notes that Asian countries, excluding China, India and Japan, are emerging with about 6 percent growth.

The event was opened by Dane Chamorro, Senior Partner at Control Risks. He gave an overview of geopolitical risk. He pointed out the top five risks for businesses in 2017, based on the assessment of issues that reflect the general trends the Control Risks team sees for the coming year.

The top risk for businesses in 2017 comes from the United States. With the new administration of President Donald Trump in place, the US has already left a disruptive mark on geopolitics. But Chamorro expressed optimism over the presence of players within the administration who understand business, such as Secretary of State Rex Tillerson, the former CEO of ExxonMobil, and Treasure Secretary Steven Mnuchin, a former Goldman Sachs banker.

The second risk comes from the European Union, with 2017 marking the start of Brexit and also elections in Germany and France. Against the backdrop of Brexit, fears that refugee flows may contain a terrorist threat are playing a big part in the campaigns – with a populist surge the primary result.

The third risk is global power tension. China is becoming more influential, both politically and economically. For example, Lotte Group recently provided land to host a US anti-missile system in South Korea, and shortly after there was an issue over Lotte’s license to operate in China. Also, during his presidential campaign, Donald Trump spoke of giving incentives for companies who decide to return their production home from abroad.

The fourth risk is regulatory disorientation, with the global regulatory landscape becoming ever more complicated and companies finding it harder to keep up. This is a familiar issue in Indonesia.

The final risk is the fragmented terror threat. With the shrinking territory held by the Islamic State, an exodus of well-trained and radicalized militants will move to other fragile states or return home.

Chamorro was followed by two panel discussions. The first on the impact of politics on investment in Indonesia and the region. The panelists for this session were Philips Vermonte, Head of the Centre for Strategic and International Studies Indonesia; Harold Tjiptadjaja, Managing Director and CIO of PT Indonesia Infrastructure Finance; and Chamorro; AmCham Indonesia Managing Director A. Lin Neumann moderated.

The panelists were bullish on Indonesia. Tjiptadjaja said the top three sectors investors should consider in Indonesia are consumer goods, energy and mining, and infrastructure. The government is pushing for many infrastructure projects, and he predicted that the current government is likely to continue for another term, making infrastructure a good play.

While political hiccups – such as religious tensions related to the current Jakarta governor’s election – are a constant in Indonesia, Philips noted that the country is by and large stable.

“If we look at the overall picture, Indonesia is a good place to do business, despite the hassles,” said Neumann. “For AmCham, we are trying to work with the government to make the business environment even better.”

The second panel consisted of Umesh Phadke, President Director of L’Oreal Indonesia; Febiani Tedja, Head of Investigations and Compliance of Control Risks Indonesia; Lina Gautama, Southeast Asia Analyst at Control Risks; and Fadli Sidek, Cyber Threat Intelligence Analyst at Control Risks.

Phadke was very optimistic, especially in his sector, consumer goods. With the advantage of demographic conditions in Indonesia, consumer goods and retail are seeing record growth in Asia and the world. Also, he said Indonesia has become a land of opportunity for startups, e-commerce, and consumer goods. The strategy in doing business anywhere is to create an understanding that business does not only want to make money, but also to create an environment that enables the growth of human resources in the country.

Overall, both panels and the RiskMap overview showed that Indonesia is still an attractive market in the region, despite concerns of corruption being a hindrance, and its security and political condition remains stable compared to other countries in the region.

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