With the dollar strengthening and commodities prices falling, capital is facing low interest rates in developed markets, and investors are searching for productive ways to add value. Emerging markets will not provide stable growth in 2016, which means that capital flows will trigger significant financial volatility globally. Annual forecasts will not adequately depict the magnitude of changes that are likely to occur in key markets in the coming year.
Although upside potential exists, FSG’s scenarios for 2016 skew toward the downside. Slowing global growth encourages political and social unrest, which could manifest itself as protectionism against foreign business, nationalistic consumer trends, or traditional unrest. Sustained exchange rate volatility will put pressure on currency pegs, increasing the risk of substantial sourcing and pricing disruption. Higher interest rates could create liquidity issues for local partners and customers.
Companies will need to focus their investments, not simply by country prioritization but also by customer segment and sub-national opportunity. In strategic markets, executives should reconsider their local product mixes and positioning in response to pricing and competitive pressures and shifts in the addressable market.
To find out how FSG can help your business manage risk in 2016 send us an email.