The Institute of Directors (IoD) has published a new policy paper, ‘Annual Policy Outlook: Trends, risks and opportunities for business in 2025’, which, amongst other areas, explores the risks facing businesses in the year ahead.
Risks highlighted in the paper include:
Geopolitics
The paper says that 2025 will be “another year of living dangerously,” stating that:
In some respects, the main geopolitical risks facing the world at the start of 2025 are similar to those of a year ago: uncertainty about the outcome of the Russia-Ukraine war; instability in the Middle East; and concern about China’s intentions with regard to Taiwan and the South China Sea. However, the nature of these risks has fundamentally changed over the last year, and the world is now an even more dangerous place.
The paper says that the inauguration of President Trump brings further uncertainty. Trump has voiced his desire to end the conflict in Ukraine in short order and may push for a ceasefire with Vladimir Putin. “However, any form of more permanent settlement, based on a partition of Ukraine, is unlikely to be palatable to either side, the paper states. It continues: “Trump’s main geopolitical challenge will be how to deal with China. His desire to slow Chinese economic and military expansion may well conflict with his platform of avoiding US enmeshment in foreign conflicts. Potential flashpoints could include a blockade of Taiwan and incursions into various disputed territories in the South China Sea. Whether such actions would evoke a robust response from Trump is hard to predict.”
Trade wars and the potential for “the emergence of tariffs on a level not seen since the 1930s” are other significant risks related to the geopolitical environment.
Climate change
“2024 was a lacklustre year in terms of addressing climate change and mitigating environmental risks” states the report and: “More extreme weather events – such as tropical storms, heat waves and flooding – seem unavoidable.”
Artificial intelligence
Despite the advance of frontier technologies, there remain concerns about whether AI hype is running ahead of commercial reality, says the paper. Mainstream companies have yet to profitably integrate AI into their business operations.
A number of key AI trends are likely to accelerate in the coming year:
- Multimodal AI will integrate diverse data sources like images, video, and audio.
- So-called AI agents offer the possibility of autonomously handling complex tasks and workflows in the workplace.
- Organizations will increasingly train AI models with their own proprietary data and use AI to make themselves more secure – to detect counterfeit documents, keep data safe, and combat deepfakes and misinformation.
The AI industry is vulnerable to geopolitical disruption, says the report. “It depends on a network of global commercial partners, especially Taiwan’s semiconductor fabrication plants. As the US and China increasingly compete for AI dominance, they are both making concerted efforts to disconnect their AI sectors from one another. The trend towards tech-nationalism will accelerate in 2025.”
AI itself brings risks as well as opportunities. It will be increasingly deployed by criminals – to disseminate adaptive malware, phishing emails, and deepfake videos.
Cybersecurity
The paper confirms that cyber risk will continue to be a major concern for business leaders in 2025. Key factors in this area include:
- The Zero Trust model … is gaining ground as a best practice in cybersecurity.
- Despite technological advancements, human behaviour continues to be a significant weak point.
- Insurance companies are tightening their underwriting requirements. Businesses will have to demonstrate robust cybersecurity practices to qualify for coverage.
