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AFP 2015 Preview: Ian Bremmer Talks Key Risks to Watch

  • By Andrew Deichler
  • Published: 8/4/2015
Ian BremmerAttendees of the Certification Luncheon at the 2015 AFP Annual Conference in Denver are in for a profound look at how political developments are shaping markets and investment environments, courtesy of one of the leading voices on geopolitical risk, Ian Bremmer. Bremmer, president and founder of Eurasia Group, created Wall Street's first global political risk index (GPRI) and is the founding chairman of the World Economic Forum's Global Agenda Council on Geopolitical Risk. He has authored several bestselling books and has written hundreds of articles for leading publications like the Wall Street Journal, The Washington Post and Harvard Business Review.

AFP recently spoke with Bremmer and gauged his thoughts on recent events that could impact corporate treasury and finance professionals.

AFP: What are the key geopolitical risks you’re seeing right now that corporate treasury and finance professionals should pay the most attention to?

Ian Bremmer:
I suppose, when you talk about the treasury and finance field, Europe would be number one. Greece has not been resolved, the transatlantic relationship is much weaker than it’s been in the last three years, standards are fragmented, and leadership in Europe is very low—if there is leadership it’s German, and German national leadership has a very different concept of how Europe should be run than how the Americans would prefer. In the context of all of this, individual European sovereignty is getting weaker because there are so many of these anti-establishment parties that are doing well. So I think, broadly speaking, it’s the politics of Europe internally.

AFP: Regarding Greece—do you have any predictions of what the outcome will be there? Do you think a Grexit has been avoided at this point?  

Bremmer:
I had a very strong view on this before the deal, which was that there was no way the Grexit was going to happen. But unfortunately, it’s now getting harder to have a strong prediction because the implementation of the deal that the Greek government signed is going to be challenging. It’s going to be challenging for Tsipras to keep this present government together. The transition to the next government will also be challenging because there are a lot of opposition parties who would like to see him go down. There aren’t a lot who want to take responsibility for what actually comes next. So it’s going to be a weaker Greek government; Tsipras is kind of the peak Greek populist power right now, but that will erode as he’s forced to put these very erroneous policies in place.

Of course, the willingness of the Germans to talk about the kind of debt reduction that’s required to get the IMF on board for the next bailout—that’s also a very big gap. They’re no guarantee they’re going to be able to finesse it. So in the coming months, there is a greater likelihood that we end up back in another emergency European summit to figure out what exactly to do, who’s going to be blamed for that, and what that means technically in terms of the policy outcomes for Greece. So it’s going to be a much messier muddle-through. It’s nice to say that we’re kicking the can down the road, but we’re actually kicking the can up the road—which means the can is going to come back.  

AFP: One of the risks that treasury and finance professionals have been focused on in recent years is cyberrisk. Just recently, the U.S. Office of Personnel Management (OPM) suffered a breach, and China was blamed for the attack. Some cybersecurity experts expect that this is only the tip of the iceberg and we will continue to see a multitude of nation-state attacks against both private and public sector entities. Do you agree with this assessment? What does it mean for U.S./China business relations?

Bremmer:
We don’t popularize all of the things the Americans are doing against the Chinese. One thing I would say is that if there is a silver lining about the 21.5 million classified accounts that the Chinese grabbed, it’s that the United States almost certainly has the same information on Chinese personnel. We’ve been doing this for a long time, and we are better at it than they are. This is classic espionage. We do that.

I’m less worried about that than I am about the Chinese engaging in more industrial espionage, which means they are not only stealing a bunch of data, technology and proprietary information, but they are giving it to their state-owned enterprises. Overtime, I think that will be a big problem between our two countries. But in the near-term, very few Western countries really want to publicize the amount of their stuff that they’ve had ripped off. Some of them aren’t aware and some are aware and don’t want to unnerve their shareholders. And they also don’t want to make it impossible to do business in China, where they still see upside for themselves.

So it has to get significantly worse than where we are today for it to really have the potential to derail the U.S./China bilateral relationship. I think that relationship will get worse than it is presently for reasons that you suggest but it’s actually in a reasonable place right now. It’s a very complicated relationship between two frenemies in which there are a lot of problems and we’re at virtual war with each other on the cyber side. But there are also a lot of areas of confluence of interests.

A longer version of this article will appear in September edition of AFP Exchange.

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