Trend 1: Macro Risk Environment Shifts | KPMG | GLOBAL

Trend 1: Macro risk environment shifts: ‘No Normal’ is the new normal

Trend 1: Macro risk environment shifts

Last year, we noted that political and regulatory uncertainty was creating challenges for infrastructure investors. But today, political and regulatory risks are just the tip of the iceberg.


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Uncertainty is everywhere: in unexpected election results and political upheaval; in rising protectionist sentiments; in disruptive and fast-moving technological advances; and in geopolitical and social upheaval. Simply put, the stable conventional wisdom that once underpinned infrastructure planning and investment seem to no longer apply. 

Interestingly, it’s largely the emerging and developing markets that are using this uncertainty to make big plays. China’s ‘One Belt, One Road’ project and the Asian Infrastructure Investment Bank (AIIB) initiative will not only improve prospects for economic growth in the region, they will also enable China to assert greater regional power. Japan’s significant investments into India’s manufacturing and infrastructure sectors; Singapore’s championing of the ASEAN community; and the Gulf States’ continued investment into western assets all carry suggestions of power politics at work and more change on the horizon. 

While no investor likes uncertainty, it seems that many are currently underpricing the increased risk into their models. In part, this is likely due to the current ‘oversupply’ of equity in the market which has forced investors to compete more fiercely for investments. But, in time, we expect investors to start becoming much more sophisticated about the way they assess, manage and price this type of uncertainty. 

The long view

The reality is that ‘no normal’ will probably be the ‘new normal’ for the foreseeable future and investors will need to get comfortable with uncertainty and learn how to properly price these new and emerging risks. Geopolitical power plays will create fundamental shifts in the world order, trade and investment flows.

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