Vasyl Soloshchuk
29 March 2022

Financial Rollercoaster 2022: How Global Finance Behaves in Face of Crisis

Stability seems to be long gone for the world economy. Since the unexpected blow of the coronavirus pandemic, global finance has been reverberating too, from the financial markets to financial service providers. 

Now, in 2022, the geopolitical disaster that Russia started got the world of finance busy with sanctions and their negative consequences in particular.

However, there are other risks to consider, which could be less obvious or justifiably pushed out of focus for now. Let’s try to simplify that risk equation of many parts to clear actionable points.

What are the global risks of 2022?

Before the Russian invasion in Ukraine, the risk environment for 2022 had seemed less tough than the one for 2021. That’s how board members and executives who took part in The NC State University-Protivity survey perceived each year when it was yet to come. However, certain changes in their joint perspective are evident year-to-year. 

For instance, talent shortage and related issues, as well as challenges in data analytics and big data utilization, made it to the top ten risks of this year. Below, we take a closer look at the major ones.

Geopolitical risks

The Ukraine-Russia negotiations might seem promising at the moment of writing. Still, Russia is known for not keeping its word and acting against expectations, so there’s no guarantee that global finance won’t face new stress. In addition, sanctions are multiplying, supply chains break, and money channels change directions and turns, which is unlikely to change or return to the previous state soon.  On the other hand, we have another unceasing friction: The Seatle Times named Russia a “test for U.S. and China relations.” 

Meanwhile, Taiwan, a producer of 90% of the advanced chips, eyes the dynamics of the turbulent geopolitical triangle closely, fearing a possible invasion of China. As these chips are essential to the functioning of our payment cards, even temporary chip shortages could cause anything from tangible economic discomfort to a banking disaster.

Domestic and international economic issues

Economic concerns save its seat in a row of the top five risks for 2022. The following worries are dominant:

  • Concerns about inflation across industries. 
  • A lack of clarity regarding central banks’ interest-rate policies 
  • Slowly recovering supply chains amid the growing demand
  • A surge in fuel, food and other costs due to supply shortages 
  • China’s output slowing down 

Social media advancement

Gaining the most weight year-over-year, this risk underscores the rapid technological progress as hard to keep up with. Finding new ways to interact with customers may hold benefits, but responding to new regulation challenges amid data transfer uncertainty, as is the case with Meta and its Metaverse, is not so exciting.

COVID uncertainty

Coronavirus is still there. With new variants on the rise and vaccination challenges, such as a lack of vaccine and not enough people being vaccinated in certain countries, the virus is also unlikely to vanish in the near future. Thus businesses are likely to keep adapting to restrictions and changes in consumer behavior and market demand.

Cybersecurity & digital dependencies

The coronavirus has left its mark in cyberspace as well. 

According to Forrester analyst Mike Gualtieri, enterprises leave 60% to 73% of their data not analyzed. While that sounds like a big miss, a risk in itself, there’s a big danger to it. That neglected data could reveal the vulnerabilities the enterprise better address. Otherwise, they can fall victim to cybercriminals. 

Going all digital was not only opening a new frontier for financial service providers. “Organizations worldwide are facing sophisticated ransomware, attacks on the digital supply chain and deeply embedded vulnerabilities,” said Peter Firstbrook, research vice president at Gartner. “The pandemic accelerated hybrid work and the shift to the cloud, challenging CISOs to secure an increasingly distributed enterprise – all while dealing with a shortage of skilled security staff,”—he added.

Talent shortage 

Great Resignation persists, and on top of that, labor costs are expected to rise this year. It’s getting harder to find a person with relevant skills, so employers face the need to start reskilling or upskilling their employees. At the same time, Environmental, Social, and Governance (ESG) Criteria gain more weight, in the job candidates’ eyes in particular, which means that this year potential employees will be even more picky when it comes to their potential employers.

Accelerating climate change

Here comes “E” in the mentioned ESG Criteria. Rising temperatures and policies on climate change can present both financial challenges and opportunities. What many businesses could face soon is climate change guidance on risk frameworks and financial disclosures and the pressing need for responsible investment.