Top Business Risks in 2022: Omicron, Supply Chain and Inflation

February 2022

In 2022, global business continues to face various risks, with a persisting Coronavirus pandemic, supply chain disruptions and inflation being top of mind for leaders. This report provides insights on how these three challenges might evolve this year and beyond, and their possible impacts on production, growth and consumer behaviour, helping companies and investors evaluate risks and move forward with a stronger strategic direction.

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Top Risks for Business in 2022 in Brief

Omicron and COVID-19 Pandemic

Although the hospitalisation rate associated with the Omicron infection wave has been lower than with the Delta and other variants, Omicron is denting near-term economic recovery and spurring inflation risks, due to the disruptions it may cause to labour supply, production and consumption. The weaker start in many key economies in 2022 will affect the overall economic outlook for the whole year.

Supply Chain Bottlenecks

The global industrial sector is forecast to recover and exceed pre-pandemic levels in 2022; however, the recovery in the supply chain remains fragile. Transportation bottlenecks, increased shortages of workers due to the spread of Omicron and potential lockdown measures in China remain among the major risks that could impact global supply chains and industrial sectors.

Inflation

Global inflation is forecast to rise from 4.3% in 2021 to 4.6% in 2022. inflationary pressures will remain high in most key economies, as some supply-demand mismatches and labour shortages could last throughout 2022. Rising geopolitical uncertainties in Europe (particularly surrounding the Russia-Ukraine conflict) and elsewhere are a main downside risk, adding pressure on energy prices. Heightened inflationary pressures could trigger central banks in some economies to tighten their monetary policy in 2022, while consumer behaviour could change due to rising prices.

Scope
Top business risks in 2022
Omicron challenges near-term economic recovery
Delays in normalisation of the labour market and global supply chains
Omicron could cause inflation risks and hold back consumer confidence
Flipkart: Gearing up vaccination and warehouse capacity to tackle Omicron threats
Google: Omicron delayed return-to-office plans; hybrid working model to stay
Global industrial sector forecast to recover in 2022
Slower consumer spending on goods to ease the strain on supply chains
Recovering production output to ease supply chain woes, but risks remain
Key risks for the global supply chains in 2022
Transportation problems to ease, but continue to put pressure on supply chains
Added shipping capacity and improved logistics solutions to ease transportation issues
Maersk intensifies the shift to hub-and-spoke model
China’s zero-COVID policy could add to supply chain problems in 2022
Omicron could temporarily increase worker shortages
Excess stockpiling could delay full recovery of the supply chains
Inflation remains high in 2022
Some price pressures to moderate, but upside risks remain significant
Inflation outlook for selected major economies
Inflation will affect spending power and consumer behaviour
Companies are adjusting business strategies amid rising input costs and inflation
Target: Keeping prices low in a bid for customer loyalty
Procter & Gamble: Size and premiumisation helped lessen the impact of price increases
Daikin: Fostering innovation to cope with soaring raw material prices
Top risks for business in 2022 in brief
What business should focus on
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